AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 4, 1998
SECURITIES ACT FILE NO. 333-60019
INVESTMENT COMPANY ACT FILE NO. 811-6669
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM N-14
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
[X] PRE-EFFECTIVE AMENDMENT NO. 1 [ ] POST-EFFECTIVE AMENDMENT NO.
(CHECK APPROPRIATE BOX OR BOXES)
---------------
MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
(609) 282-2800
(AREA CODE AND TELEPHONE NUMBER)
---------------
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES:
NUMBER, STREET, CITY, STATE, ZIP CODE)
---------------
ARTHUR ZEIKEL
MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.
800 SCUDDERS MILL ROAD, PLAINSBORO, NEW JERSEY 08536
MAILING ADDRESS: P.O. BOX 9011, PRINCETON, NEW JERSEY 08543-9011
(NAME AND ADDRESS OF AGENT FOR SERVICE)
---------------
COPIES TO:
FRANK P. BRUNO, ESQ. MICHAEL J. HENNEWINKEL, ESQ.
BROWN & WOOD LLP MERRILL LYNCH ASSET MANAGEMENT
ONE WORLD TRADE CENTER 800 SCUDDERS MILL ROAD
NEW YORK, NY 10048-0557 PLAINSBORO, NJ 08536
---------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the Registration Statement becomes effective under
the Securities Act of 1933.
---------------
TITLE OF SECURITIES BEING REGISTERED: Common Stock, Par Value $.10 per share.
No filing fee is required because of reliance on Section 24(f) under the
Investment Company Act of 1940, as amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(A) UNDER THE SECURITIES ACT OF 1933
FORM N-14
ITEM NO. PROXY STATEMENT AND PROSPECTUS CAPTION
- ---------- ---------------------------------------------------------
PART A
Item 1. Beginning of Registration Statement and
Outside Front Cover Page of Prospectus ...... Registration Statement Cover Page; Proxy Statement and
Prospectus Cover Page
Item 2. Beginning and Outside Back Cover Page of
Prospectus .................................. Table of Contents
Item 3. Fee Table, Synopsis Information and Risk
Factors ..................................... Summary; Risk Factors and Special Considerations
Item 4. Information about the Transaction ........... Summary; The Reorganization -- Agreement and Plan of
Reorganization
Item 5. Information about the Registrant ............ Proxy Statement and Prospectus Cover Page; Summary;
Comparison of the Funds; Additional Information
Item 6. Information about the Company Being
Acquired .................................... Proxy Statement and Prospectus Cover Page; Summary;
Comparison of the Funds; Additional Information
Item 7. Voting Information .......................... Notice of Special Meeting of Stockholders; Introduction;
Summary; Comparison of the Funds; Information Concerning
the Special Meeting; Additional Information
Item 8. Interest of Certain Persons and Experts ..... Not Applicable
Item 9. Additional Information Required for
Reoffering by Persons Deemed to be
Underwriters ................................ Not Applicable
PART B
Item 10. Cover Page .................................. Cover Page
Item 11. Table of Contents ........................... Table of Contents
Item 12. Additional Information about the
Registrant .................................. General Information
Item 13. Additional Information about the Company
Being Acquired .............................. General Information
Item 14. Financial Statements ........................ Financial Statements
PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
MERRILL LYNCH FUND FOR TOMORROW, INC.
P.O. BOX 9011
PRINCETON, NEW JERSEY 08543-9011
---------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
---------------
TO BE HELD ON OCTOBER 13, 1998
TO THE STOCKHOLDERS OF
MERRILL LYNCH FUND FOR TOMORROW, INC.:
NOTICE IS HEREBY GIVEN that a special meeting of stockholders (the
"Meeting") of Merrill Lynch Fund For Tomorrow, Inc. ("Fund For Tomorrow") will
be held at the offices of Merrill Lynch Asset Management, L.P., 800 Scudders
Mill Road, Plainsboro, New Jersey on October 13, 1998 at 9:00 a.m., New York
time, for the following purposes:
(1) To approve or disapprove an Agreement and Plan of Reorganization (the
"Agreement and Plan of Reorganization") providing for the acquisition of
substantially all of the assets of Fund For Tomorrow by Merrill Lynch
Fundamental Growth Fund, Inc. ("Fundamental Growth Fund"), and the assumption
of substantially all of the liabilities of Fund For Tomorrow by Fundamental
Growth Fund, in exchange solely for an equal aggregate value of newly-issued
shares of Fundamental Growth Fund. The Agreement and Plan of Reorganization
also provides for distribution of such shares of Fundamental Growth Fund to
stockholders of Fund For Tomorrow in liquidation of Fund For Tomorrow. A vote
in favor of this proposal will constitute a vote in favor of the liquidation
and dissolution of Fund For Tomorrow and the termination of its registration
under the Investment Company Act of 1940, as amended; and
(2) To transact such other business as properly may come before the
Meeting or any adjournment thereof.
The Board of Directors of Fund For Tomorrow has fixed the close of
business on August 25, 1998 as the record date for the determination of
stockholders entitled to notice of, and to vote at, the Meeting or any
adjournment thereof.
A complete list of the stockholders of Fund For Tomorrow entitled to vote
at the Meeting will be available and open to the examination of any
stockholders of Fund For Tomorrow for any purpose germane to the Meeting during
ordinary business hours from and after September 29, 1998 at the offices of
Fund For Tomorrow, 800 Scudders Mill Road, Plainsboro, New Jersey.
You are cordially invited to attend the Meeting. Stockholders who do not
expect to attend the Meeting in person are requested to complete, date and sign
the enclosed form of proxy and return it promptly in the envelope provided for
that purpose. The enclosed proxy is being solicited on behalf of the Board of
Directors of Fund For Tomorrow.
By Order of the Board of Directors,
SUSAN B. BAKER
SECRETARY
Plainsboro, New Jersey
Dated: September 8, 1998
MERRILL LYNCH FUND FOR TOMORROW, INC.
MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.
P.O. BOX 9011
PRINCETON, NEW JERSEY 08543-9011
(609) 282-2800
---------------
SPECIAL MEETING OF STOCKHOLDERS OF
MERRILL LYNCH FUND FOR TOMORROW, INC.
---------------
OCTOBER 13, 1998
This Proxy Statement and Prospectus is furnished in connection with the
solicitation of proxies on behalf of the Board of Directors of Merrill Lynch
Fund For Tomorrow, Inc., a Maryland corporation ("Fund For Tomorrow"), for use
at the Special Meeting of Stockholders of Fund For Tomorrow (the "Meeting")
called to approve or disapprove the proposed reorganization whereby Merrill
Lynch Fundamental Growth Fund, Inc., a Maryland corporation ("Fundamental
Growth Fund"), will acquire substantially all of the assets, and will assume
substantially all of the liabilities, of Fund For Tomorrow, in exchange solely
for an equal aggregate value of newly-issued shares of Fundamental Growth Fund
(the "Reorganization"). Immediately upon the receipt by Fundamental Growth Fund
of the assets of Fund For Tomorrow and the assumption by Fundamental Growth
Fund of the liabilities of Fund For Tomorrow, Fund For Tomorrow will distribute
the shares of Fundamental Growth Fund received in the Reorganization to the
stockholders of Fund For Tomorrow. Thereafter, Fund For Tomorrow will terminate
its registration under the Investment Company Act of 1940, as amended (the
"Investment Company Act"), and will dissolve in accordance with the laws of the
State of Maryland.
Holders of shares of Fund For Tomorrow will receive that class of shares
of Fundamental Growth Fund having the same letter designation (I.E., Class A,
Class B, Class C or Class D) and the same distribution fees, account
maintenance fees, and sales charges (including contingent deferred sales
charges ("CDSCs")), if any (the "Corresponding Shares"), as the shares of Fund
For Tomorrow held by them immediately prior to the Reorganization. The
aggregate net asset value of the Corresponding Shares of Fundamental Growth
Fund to be issued to the stockholders of Fund For Tomorrow will equal the
aggregate net asset value of the outstanding shares of Fund For Tomorrow as set
forth in the Agreement and Plan of Reorganization. Fund For Tomorrow and
Fundamental Growth Fund sometimes are referred to herein collectively as the
"Funds" and individually as a "Fund," as the context requires. Fundamental
Growth Fund following the Reorganization is sometimes referred to herein as the
"Combined Fund."
This Proxy Statement and Prospectus serves as a prospectus of Fundamental
Growth Fund under the Securities Act of 1933, as amended (the "Securities
Act"), in connection with the issuance of shares of Fundamental Growth Fund to
Fund For Tomorrow pursuant to the terms of the Reorganization.
Both Fund For Tomorrow and Fundamental Growth Fund are open-end management
investment companies that seek to provide stockholders with long-term growth of
capital. Fundamental Growth Fund seeks to invest in a diversified portfolio of
equity securities, placing particular emphasis on companies that have exhibited
above-average growth rates in earnings. Fund For Tomorrow invests in a
quality-oriented portfolio of securities, primarily common stock. Using a
thematic approach of investing in long-term trends, management of Fund For
Tomorrow seeks to identify companies whose products and services are believed
to represent attractive investment opportunities. There can be no assurance
that, after the Reorganization, Fundamental Growth Fund will achieve its
investment objective.
The current prospectus relating to Fundamental Growth Fund, dated November
26, 1997 (the "Fundamental Growth Fund Prospectus"), accompanies this Proxy
Statement and Prospectus and is incorporated herein by reference. The Annual
Report to Shareholders of Fundamental Growth Fund for the year ended August 31,
1997 and the Semi-Annual Report to Shareholders of Fundamental Growth Fund for
the six months ended February 28, 1998 also accompany this Proxy Statement and
Prospectus. A statement of additional information relating to Fundamental
Growth Fund, dated November 26, 1997 (the "Fundamental Growth Fund Statement"),
a prospectus of Fund For Tomorrow dated April 30, 1998 (the "Fund For Tomorrow
Prospectus") and a statement of additional information relating to Fund For
Tomorrow, dated April 30, 1998 (the "Fund For Tomorrow Statement"), have been
filed with the Securities and Exchange Commission (the "Commission"). Such
documents may be obtained, without charge, by writing either Fund For Tomorrow
or Fundamental Growth Fund at the address above, or by calling 1-800-456-4587,
ext. 123.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROXY STATEMENT AND PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
---------------
This Proxy Statement and Prospectus sets forth concisely the information
about Fundamental Growth Fund that stockholders of Fund For Tomorrow should
know before considering the Reorganization and should be retained for future
reference. Fund For Tomorrow has authorized the solicitation of proxies in
connection with the Reorganization solely on the basis of this Proxy Statement
and Prospectus and the accompanying documents.
A statement of additional information relating to the Reorganization (the
"Statement of Additional Information"), including pro forma financial
statements of Fund For Tomorrow and Fundamental Growth Fund, is on file with
the Commission. It is available from Fundamental Growth Fund without charge,
upon request by calling the toll free telephone number set forth above or by
writing Fundamental Growth Fund at its principal executive offices. The
Statement of Additional Information, dated September 8, 1998 is incorporated by
reference into this Proxy Statement and Prospectus. The Commission maintains a
web site (http://www.sec.gov) that contains the Statement of Additional
Information, the Fundamental Growth Fund Prospectus, the Fund For Tomorrow
Prospectus, the Fundamental Growth Fund Statement, the Fund For Tomorrow
Statement, other material incorporated by reference and other information
regarding the Funds.
The address of the principal executive offices of both Fund For Tomorrow
and Fundamental Growth Fund is 800 Scudders Mill Road, Plainsboro, New Jersey
08536, and the telephone number is (609) 282-2800.
---------------
THE DATE OF THIS PROXY STATEMENT AND PROSPECTUS IS SEPTEMBER 8, 1998.
TABLE OF CONTENTS
PAGE
-----
INTRODUCTION ............................................................................. 1
SUMMARY .................................................................................. 2
THE REORGANIZATION ...................................................................... 2
PRO FORMA FEE TABLE FOR CLASS A AND CLASS B STOCKHOLDERS OF FUND FOR TOMORROW,
FUNDAMENTAL GROWTH FUND AND THE COMBINED FUND AS OF JUNE 30, 1998 (UNAUDITED) ......... 3
PRO FORMA FEE TABLE FOR CLASS C AND CLASS D STOCKHOLDERS OF FUND FOR TOMORROW,
FUNDAMENTAL GROWTH FUND AND THE COMBINED FUND AS OF JUNE 30, 1998 (UNAUDITED) ......... 4
RISK FACTORS AND SPECIAL CONSIDERATIONS .................................................. 10
COMPARISON OF THE FUNDS .................................................................. 12
FINANCIAL HIGHLIGHTS .................................................................... 12
INVESTMENT OBJECTIVES AND POLICIES ...................................................... 17
OTHER INVESTMENT POLICIES ............................................................... 18
INVESTMENT RESTRICTIONS ................................................................. 18
MANAGEMENT .............................................................................. 18
PURCHASE OF SHARES ...................................................................... 19
REDEMPTION OF SHARES .................................................................... 19
PERFORMANCE ............................................................................. 20
SHAREHOLDER RIGHTS ...................................................................... 20
DIVIDENDS AND DISTRIBUTIONS ............................................................. 21
TAX INFORMATION ......................................................................... 21
PORTFOLIO TRANSACTIONS .................................................................. 21
PORTFOLIO TURNOVER ...................................................................... 21
ADDITIONAL INFORMATION .................................................................. 21
THE REORGANIZATION ....................................................................... 22
GENERAL ................................................................................. 22
PROCEDURE ............................................................................... 23
TERMS OF THE AGREEMENT AND PLAN OF REORGANIZATION ....................................... 23
POTENTIAL BENEFITS TO STOCKHOLDERS AS A RESULT OF THE REORGANIZATION .................... 24
TAX CONSEQUENCES OF THE REORGANIZATION .................................................. 24
CAPITALIZATION .......................................................................... 25
INFORMATION CONCERNING THE SPECIAL MEETING ............................................... 26
DATE, TIME AND PLACE OF MEETING ......................................................... 26
SOLICITATION, REVOCATION AND USE OF PROXIES ............................................. 26
RECORD DATE AND OUTSTANDING SHARES ...................................................... 26
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF FUND FOR TOMORROW AND
FUNDAMENTAL GROWTH FUND ................................................................. 27
VOTING RIGHTS AND REQUIRED VOTE ......................................................... 27
ADDITIONAL INFORMATION ................................................................... 27
LEGAL PROCEEDINGS ........................................................................ 28
LEGAL OPINIONS ........................................................................... 28
EXPERTS .................................................................................. 28
STOCKHOLDER PROPOSALS .................................................................... 28
EXHIBIT I ................................................................................ I-1
i
INTRODUCTION
This Proxy Statement and Prospectus is furnished in connection with the
solicitation of proxies on behalf of the Board of Directors of Fund For
Tomorrow for use at the Meeting to be held at the offices of Merrill Lynch
Asset Management, L.P. ("MLAM"), 800 Scudders Mill Road, Plainsboro, New Jersey
on October 13, 1998, at 9:00 a.m., New York time. The mailing address for Fund
For Tomorrow is P.O. Box 9011, Princeton, New Jersey 08543-9011. The
approximate mailing date of this Proxy Statement and Prospectus is September
11, 1998.
Any person giving a proxy may revoke it at any time prior to its exercise
by executing a superseding proxy, by giving written notice of the revocation to
the Secretary of Fund For Tomorrow at the address indicated above or by voting
in person at the Meeting. All properly executed proxies received prior to the
Meeting will be voted at the Meeting in accordance with the instructions marked
thereon or otherwise as provided therein. Unless instructions to the contrary
are marked, properly executed proxies will be voted "FOR" the proposal to
approve the Agreement and Plan of Reorganization between Fund For Tomorrow and
Fundamental Growth Fund (the "Agreement and Plan of Reorganization").
Approval of the Agreement and Plan of Reorganization will require the
affirmative vote of Fund For Tomorrow stockholders representing a majority of
the total number of votes entitled to be cast thereon. Stockholders will vote
as a single class on the proposal to approve the Agreement and Plan of
Reorganization. See "Information Concerning the Special Meeting."
The Board of Directors of Fund For Tomorrow knows of no business other
than that discussed above that will be presented for consideration at the
Meeting. If any other matter is properly presented, it is the intention of the
persons named in the enclosed proxy to vote in accordance with their best
judgment.
1
SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN
THIS PROXY STATEMENT AND PROSPECTUS (INCLUDING DOCUMENTS INCORPORATED BY
REFERENCE) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE COMPLETE
INFORMATION CONTAINED IN THIS PROXY STATEMENT AND PROSPECTUS AND IN THE
AGREEMENT AND PLAN OF REORGANIZATION, ATTACHED HERETO AS EXHIBIT I.
IN THIS PROXY STATEMENT AND PROSPECTUS, THE TERM "REORGANIZATION" REFERS
COLLECTIVELY TO (I) THE ACQUISITION OF SUBSTANTIALLY ALL OF THE ASSETS AND THE
ASSUMPTION OF SUBSTANTIALLY ALL OF THE LIABILITIES OF FUND FOR TOMORROW BY
FUNDAMENTAL GROWTH FUND IN EXCHANGE FOR THE CORRESPONDING SHARES AND THE
SUBSEQUENT DISTRIBUTION OF CORRESPONDING SHARES OF FUNDAMENTAL GROWTH FUND TO
THE STOCKHOLDERS OF FUND FOR TOMORROW; AND (II) THE SUBSEQUENT DEREGISTRATION
AND DISSOLUTION OF FUND FOR TOMORROW.
THE REORGANIZATION
At a meeting of the Board of Directors of Fund For Tomorrow held on July
27, 1998, the Board of Directors of Fund For Tomorrow approved a proposal that
Fundamental Growth Fund acquire substantially all of the assets, and assume
substantially all of the liabilities, of Fund For Tomorrow in exchange solely
for shares of Fundamental Growth Fund to be distributed to the stockholders of
Fund For Tomorrow.
Based upon their evaluation of all relevant information, the Directors of
Fund For Tomorrow have determined that the Reorganization will potentially
benefit the stockholders of Fund For Tomorrow. Specifically, after the
Reorganization, Fund For Tomorrow stockholders will remain invested in a
diversified open-end fund, which, like Fund For Tomorrow, seeks long-term
growth of capital. Moreover, since the net assets of Fundamental Growth Fund as
of June 30, 1998 were $1,061,566,810 and will increase by approximately
$311,611,903 (the net asset value of Fund For Tomorrow as of June 30, 1998) as
a result of the Reorganization, Fund For Tomorrow stockholders are likely to
experience certain additional benefits, including without limitation, lower
expenses per share and potential economies of scale. See "Summary -- Pro Forma
Fee Tables" and "The Reorganization -- Potential Benefits to Stockholders as a
Result of the Reorganization."
The Board of Directors of Fund For Tomorrow, including all of the
Directors who are not "interested persons," as defined in the Investment
Company Act, has determined that the Reorganization is in the best interests of
Fund For Tomorrow and that the interests of existing Fund For Tomorrow
stockholders will not be diluted as a result of effecting the Reorganization.
If all of the requisite approvals are obtained, it is anticipated that the
Reorganization will occur as soon as practicable after such approvals, provided
that Fund For Tomorrow and Fundamental Growth Fund have obtained prior to that
time a favorable private letter ruling from the Internal Revenue Service (the
"IRS") concerning the tax consequences of the Reorganization as set forth in
the Agreement and Plan of Reorganization. The Agreement and Plan of
Reorganization may be terminated, and the Reorganization abandoned, whether
before or after approval by the stockholders of Fund For Tomorrow, at any time
prior to the Exchange Date (as defined below), (i) by mutual consent of the
Board of Directors of Fund For Tomorrow and the Board of Directors of
Fundamental Growth Fund; (ii) by the Board of Directors of Fund For Tomorrow if
any condition to Fund For Tomorrow's obligations has not been fulfilled or
waived by such Board; or (iii) by the Board of Directors of Fundamental Growth
Fund if any condition to Fundamental Growth Fund's obligations has not been
fulfilled or waived by such Board.
2
PRO FORMA FEE TABLE FOR CLASS A AND CLASS B STOCKHOLDERS OF FUND FOR TOMORROW,
FUNDAMENTAL GROWTH FUND
AND THE COMBINED FUND AS OF JUNE 30, 1998 (UNAUDITED)
CLASS A SHARES (a)
-----------------------------------------------
ACTUAL
-------------------------------
FUND FOR FUNDAMENTAL PRO FORMA
TOMORROW GROWTH FUND COMBINED
--------------- --------------- ---------------
STOCKHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge Imposed
on Purchases (as a percentage of
offering price) ....................... 5.25%(c) 5.25%(c) 5.25%(c)
Sales Charge Imposed on Dividend
Reinvestments ......................... None None None
Deferred Sales Charge (as a
percentage of original purchase
price or redemption proceeds,
whichever is lower) ................... None(d) None(d) None(d)
Exchange Fee ........................... None None None
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF TOTAL NET
ASSETS):
Investment Advisory Fees(f) ............ 0.65% 0.65% 0.65%
12b-1-Fees(g):
Account Maintenance Fees .............. None None None
Distribution Fees ..................... None None None
Other Expenses:
Stockholder Servicing Costs(h) ........ 0.15% 0.11% 0.11%
Other ................................. 0.13% 0.07% 0.06%
---- ---- ----
Total Other Expenses ................. 0.28% 0.18% 0.17%
---- ---- ----
TOTAL FUND OPERATING EXPENSES ........... 0.93% 0.83% 0.82%
==== ==== ====
CLASS B SHARES (b)
-------------------------------------------------------------------
ACTUAL
-------------------------------------------------------------------
FUNDAMENTAL
FUND FOR TOMORROW GROWTH FUND
--------------------------------- ---------------------------------
STOCKHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge Imposed
on Purchases (as a percentage of
offering price) .................... None None
Sales Charge Imposed on Dividend
Reinvestments ...................... None None
Deferred Sales Charge (as a
percentage of original purchase
price or redemption proceeds,
whichever is lower) ................ 4.0% during the first year, 4.0% during the first year,
decreasing 1.0% annually decreasing 1.0% annually
thereafter to 0.0% after the thereafter to 0.0% after the
fourth year(e) fourth year(e)
Exchange Fee ........................ None None
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF TOTAL NET
ASSETS):
Investment Advisory Fees(f) ......... 0.65% 0.65%
12b-1-Fees(g):
Account Maintenance Fees ........... 0.25% 0.25%
Distribution Fees .................. 0.75% 0.75%
(CLASS B SHARES CONVERT TO (CLASS B SHARES CONVERT TO
CLASS D SHARES AUTOMATICALLY CLASS D SHARES AUTOMATICALLY
AFTER APPROXIMATELY EIGHT YEARS AFTER APPROXIMATELY EIGHT YEARS
AND CEASE BEING SUBJECT TO AND CEASE BEING SUBJECT TO
DISTRIBUTION FEES) DISTRIBUTION FEES)
Other Expenses:
Stockholder Servicing Costs(h) ..... 0.15% 0.11%
Other .............................. 0.13% 0.07%
---- ----
Total Other Expenses .............. 0.28% 0.18%
---- ----
TOTAL FUND OPERATING EXPENSES ........ 1.93% 1.83%
==== ====
CLASS B SHARES (b)
----------------------------------
PRO FORMA
COMBINED
----------------------------------
STOCKHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge Imposed
on Purchases (as a percentage of
offering price) .................... None
Sales Charge Imposed on Dividend
Reinvestments ...................... None
Deferred Sales Charge (as a
percentage of original purchase
price or redemption proceeds,
whichever is lower) ................ 4.0% during the first year,
decreasing 1.0% annually
thereafter to 0.0% after the
fourth year(e)
Exchange Fee ........................ None
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF TOTAL NET
ASSETS):
Investment Advisory Fees(f) ......... 0.65%
12b-1-Fees(g):
Account Maintenance Fees ........... 0.25%
Distribution Fees .................. 0.75%
(CLASS B SHARES CONVERT TO
CLASS D SHARES AUTOMATICALLY
AFTER APPROXIMATELY EIGHT YEARS
AND CEASE BEING SUBJECT TO
DISTRIBUTION FEES)
Other Expenses:
Stockholder Servicing Costs(h) ..... 0.11%
Other .............................. 0.06%
----
Total Other Expenses .............. 0.17%
----
TOTAL FUND OPERATING EXPENSES ........ 1.82%
====
- -------
(a) Class A shares are sold to a limited group of investors including existing
Class A stockholders, certain retirement plans and participants in certain
fee-based programs. See "Comparison of the Funds -- Purchase of Shares."
(b) Class B shares convert to Class D shares automatically approximately eight
years after initial purchase. See "Comparison of the Funds -- Purchase of
Shares."
(c) Reduced for Class A purchases of $25,000 and over, and waived for purchases
by certain retirement plans and in connection with certain fee-based
programs. Purchases of $1,000,000 or more may not be subject to an initial
sales charge. See "Comparison of the Funds -- Purchase of Shares."
(d) Class A shares are not subject to a CDSC, except that certain purchases of
$1,000,000 or more that are not subject to an initial sales charge may
instead be subject to a CDSC of 1.0% of amounts redeemed within the first
year of purchase. Such CDSC may be waived in connection with certain
fee-based programs.
(e) The CDSC may be modified in connection with certain fee-based programs.
(f) See "Comparison of the Funds -- Management."
(g) See "Comparison of the Funds -- Purchase of Shares."
(h) See "Comparison of the Funds -- Additional Information -- Transfer Agent,
Dividend Disbursing Agent and Shareholder Servicing Agent."
3
PRO FORMA FEE TABLE FOR CLASS C AND CLASS D STOCKHOLDERS OF FUND FOR TOMORROW,
FUNDAMENTAL GROWTH FUND
AND THE COMBINED FUND AS OF JUNE 30, 1998 (UNAUDITED)
CLASS C SHARES
--------------------------------------------------
ACTUAL
---------------------------------
FUND FOR FUNDAMENTAL PRO FORMA
TOMORROW GROWTH FUND COMBINED
---------------- ---------------- ----------------
STOCKHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge Imposed on Purchases (as a percentage of
offering price) ................................................... None None None
Sales Charge Imposed on Dividend Reinvestments ..................... None None None
Deferred Sales Charge (as a percentage of original purchase price or
redemption proceeds, whichever is lower) .......................... 1.0% for one 1.0% for one 1.0% for one
year(b) year(b) year(b)
Exchange Fee ....................................................... None None None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF TOTAL NET
ASSETS):
Investment Advisory Fees(d) ........................................ 0.65% 0.65% 0.65%
12b-1-Fees(e):
Account Maintenance Fees .......................................... 0.25% 0.25% 0.25%
Distribution Fees ................................................. 0.75% 0.75% 0.75%
Other Expenses:
Stockholder Servicing Costs(f) .................................... 0.15% 0.11% 0.11%
Other ............................................................. 0.13% 0.07% 0.06%
---- ---- ----
Total Other Expenses ............................................. 0.28% 0.18% 0.17%
---- ---- ----
TOTAL FUND OPERATING EXPENSES ...................................... 1.93% 1.83% 1.82%
==== ==== ====
CLASS D SHARES
-----------------------------------------------
ACTUAL
-------------------------------
FUND FOR FUNDAMENTAL PRO FORMA
TOMORROW GROWTH FUND COMBINED
--------------- --------------- ---------------
STOCKHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge Imposed on Purchases (as a percentage of
offering price) ................................................... 5.25%(a) 5.25%(a) 5.25%(a)
Sales Charge Imposed on Dividend Reinvestments ..................... None None None
Deferred Sales Charge (as a percentage of original purchase price or
redemption proceeds, whichever is lower) .......................... None(c) None(c) None(c)
Exchange Fee ....................................................... None None None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF TOTAL NET
ASSETS):
Investment Advisory Fees(d) ........................................ 0.65% 0.65% 0.65%
12b-1-Fees(e):
Account Maintenance Fees .......................................... 0.25% 0.25% 0.25%
Distribution Fees ................................................. None None None
Other Expenses:
Stockholder Servicing Costs(f) .................................... 0.15% 0.11% 0.11%
Other ............................................................. 0.13% 0.07% 0.06%
------ ------ ------
Total Other Expenses ............................................. 0.28% 0.18% 0.17%
------ ------ ------
TOTAL FUND OPERATING EXPENSES ...................................... 1.18% 1.08% 1.07%
====== ====== ======
- -------
(a) Reduced for Class D purchases of $25,000 and over. Like Class A purchases,
certain Class D purchases of $1,000,000 or more may not be subject to an
initial sales charge. See "Comparison of the Funds -- Purchase of Shares."
(b) The CDSC may be waived in connection with certain fee-based programs.
(c) Like Class A shares, Class D shares are not subject to a CDSC, except that
purchases of $1,000,000 or more that are not subject to an initial sales
charge may instead be subject to a CDSC of 1.0% of amounts redeemed within
the first year after purchase. Such CDSC may be waived in connection with
certain fee-based programs.
(d) See "Comparison of the Funds -- Management."
(e) See "Comparison of the Funds -- Purchase of Shares."
(f) See "Comparison of the Funds -- Additional Information -- Transfer Agent,
Dividend Disbursing Agent and Shareholder Servicing Agent."
4
EXAMPLES:
CUMULATIVE EXPENSES PAID ON CLASS A AND
CLASS B SHARES FOR THE PERIOD OF:
---------------------------------------
CLASS A SHARES
---------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- --------- --------- ----------
An investor would pay the following expenses on a $1,000 investment, including the
maximum sales load of $52.50 (Class A shares only) and assuming (1) the Total
Fund Operating Expenses set forth on page 3 for the relevant Fund, (2) a 5%
annual return throughout the periods and (3) redemption at the end of the period
(including any applicable CDSC for Class B shares):
Fund For Tomorrow .............................................................. $61 $81 $101 $161
Fundamental Growth Fund ........................................................ 61 78 96 150
Combined Fund+ ................................................................. 60 77 96 149
An investor would pay the following expenses on the same $1,000 investment
assuming no redemption at the end of the period:
Fund For Tomorrow .............................................................. $61 $81 $101 $161
Fundamental Growth Fund ........................................................ 61 78 96 150
Combined Fund+ ................................................................. 60 77 96 149
CUMULATIVE EXPENSES PAID ON CLASS A AND
CLASS B
SHARES FOR THE PERIOD OF:
--------------------------------------
CLASS B SHARES
--------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- --------- --------- ---------
An investor would pay the following expenses on a $1,000 investment, including the
maximum sales load of $52.50 (Class A shares only) and assuming (1) the Total
Fund Operating Expenses set forth on page 3 for the relevant Fund, (2) a 5%
annual return throughout the periods and (3) redemption at the end of the period
(including any applicable CDSC for Class B shares):
Fund For Tomorrow .............................................................. $60 $81 $104 $ 206*
Fundamental Growth Fund ........................................................ 59 78 99 195*
Combined Fund+ ................................................................. 58 77 99 194*
An investor would pay the following expenses on the same $1,000 investment
assuming no redemption at the end of the period:
Fund For Tomorrow .............................................................. $20 $61 $104 $ 206*
Fundamental Growth Fund ........................................................ 19 58 99 195*
Combined Fund+ ................................................................. 18 57 99 194*
CUMULATIVE EXPENSES PAID ON CLASS C AND
CLASS D SHARES FOR THE PERIOD OF:
---------------------------------------
CLASS C SHARES
---------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- --------- --------- ----------
An investor would pay the following expenses on a $1,000 investment, including the
maximum sales load of $52.50 (Class D shares only) and assuming (1) the Total
Fund Operating Expenses set forth on page 4 for the relevant Fund, (2) a 5%
annual return throughout the periods and (3) redemption at the end of the period
(including any applicable CDSC for Class C shares):
Fund For Tomorrow .............................................................. $30 $61 $104 $225
Fundamental Growth Fund ........................................................ 29 58 99 215
Combined Fund+ ................................................................. 28 57 99 214
An investor would pay the following expenses on the same $1,000 investment
assuming no redemption at the end of the period:
Fund For Tomorrow .............................................................. $20 $61 $104 $225
Fundamental Growth Fund ........................................................ 19 58 99 215
Combined Fund+ ................................................................. 18 57 99 214
CUMULATIVE EXPENSES PAID ON CLASS C AND
CLASS D
SHARES FOR THE PERIOD OF:
--------------------------------------
CLASS D SHARES
--------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- --------- --------- ---------
An investor would pay the following expenses on a $1,000 investment, including the
maximum sales load of $52.50 (Class D shares only) and assuming (1) the Total
Fund Operating Expenses set forth on page 4 for the relevant Fund, (2) a 5%
annual return throughout the periods and (3) redemption at the end of the period
(including any applicable CDSC for Class C shares):
Fund For Tomorrow .............................................................. $64 $88 $114 $188
Fundamental Growth Fund ........................................................ 63 85 109 177
Combined Fund+ ................................................................. 63 85 108 176
An investor would pay the following expenses on the same $1,000 investment
assuming no redemption at the end of the period:
Fund For Tomorrow .............................................................. $64 $88 $114 $188
Fundamental Growth Fund ........................................................ 63 85 109 177
Combined Fund+ ................................................................. 63 85 108 176
- -------
* Assumes conversion of Class B shares to Class D shares approximately eight
years after initial purchase.
+ Assuming the Reorganization had taken place on June 30, 1998.
5
The foregoing Fee Tables are intended to assist investors in understanding
the costs and expenses that a Fund For Tomorrow or Fundamental Growth Fund
stockholder bears directly or indirectly as compared to the costs and expenses
that would be borne by such investors on a pro forma basis taking into account
the Reorganization. The Examples set forth above assume reinvestment of all
dividends and distributions and utilize a 5% annual rate of return as mandated
by Commission regulations. THE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RATES OF RETURN, AND ACTUAL
EXPENSES OR ANNUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE ASSUMED FOR
PURPOSES OF THE EXAMPLES. See "Summary," "The Reorganization -- Potential
Benefits to Stockholders as a Result of the Reorganization," "Comparison of the
Funds -- Management," " -- Purchase of Shares" and " -- Redemption of Shares."
BUSINESS OF FUND FOR TOMORROW... Fund For Tomorrow was incorporated under
the laws of the State of Maryland on October
5, 1983 and commenced operations on March 5,
1984. Fund For Tomorrow is a diversified,
open-end management investment company.
As of June 30, 1998, Fund For Tomorrow had
net assets of approximately $311,611,903.
BUSINESS OF FUNDAMENTAL
GROWTH FUND..................... Fundamental Growth Fund was incorporated
under the laws of the State of Maryland on
April 30, 1992, and commenced operations on
December 24, 1992. Fundamental Growth Fund is
a diversified, open-end management
investment company.
As of June 30, 1998, Fundamental Growth Fund
had net assets of approximately
$1,061,566,810.
COMPARISON OF THE FUNDS......... INVESTMENT OBJECTIVES. Both Fund For
Tomorrow and Fundamental Growth Fund seek to
provide stockholders with long-term growth of
capital by investing primarily in equity
securities.
INVESTMENT POLICIES. Fund For Tomorrow seeks
to invest in a quality-oriented portfolio of
securities, primarily common stock. In
pursuing this objective, Fund For Tomorrow
uses a thematic approach of investing in
long-term trends, seeking to identify
important investment concepts of the future
and reviewing existing concepts to confirm
their validity in meeting the Fund's
objective. As part of this thematic
approach, Fund For Tomorrow seeks to
identify companies whose products and
services are believed to represent
attractive investment opportunities. It is
anticipated that Fund For Tomorrow will
invest primarily in common stocks of such
companies. However, when Fund For Tomorrow
believes it is advisable to do so, it may
invest in other securities, including, but
not limited to, convertible securities,
preferred stocks and bonds. Fund For
Tomorrow does not presently intend to
purchase bonds rated lower than BBB by
Standard & Poor's ("S&P") or Baa by Moody's
Investors Service, Inc. ("Moody's"). Fund
For Tomorrow may invest in securities issued
by large, medium and small capitalized
companies.
Fundamental Growth Fund seeks to invest in a
diversified portfolio of equity securities
placing particular emphasis on companies
that have exhibited above-average growth
rates in earnings, resulting from a variety
of factors including, but not limited to,
above-average growth rates in sales, profit
margin improvement, proprietary or niche
products or services, leading market shares,
and underlying strong industry growth.
Fundamental Growth Fund will also emphasize
companies having medium to large stock
market capitalizations ($500 million or
more). Fundamental Growth Fund invests
primarily in common stock, and to a lesser
extent, securities convertible into common
stock and rights to subscribe for common
stock.
6
Fund For Tomorrow may invest up to 25% of
its assets in the securities of foreign
issuers, including issuers in foreign
countries with smaller capital markets. Fund
For Tomorrow has reserved the right to
invest, temporarily, all or a portion of its
assets in high quality money market
securities (such as U.S. Treasury bills,
bank certificates of deposit, commercial
paper and repurchase agreements) for
purposes of enhancing liquidity and avoiding
the effects of declining stock prices when
it seems advisable to do so in light of
prevailing market or economic conditions.
The proportion of Fund For Tomorrow's assets
that are invested in money market securities
will vary from time to time.
Fundamental Growth Fund may invest up to 10%
of its total assets in equity securities of
foreign issuers (purchases of American
Depositary Receipts ("ADRs"), however, are
not subject to this restriction).
Fundamental Growth Fund may invest in
securities of foreign issuers in the form of
ADRs, European Depositary Receipts ("EDRs")
or other securities convertible into
securities of foreign issuers. Fundamental
Growth Fund maintains at least 65% of its
total assets invested in equity securities
except during defensive periods. Fundamental
Growth Fund may, as a defensive measure and
to provide for redemptions, hold other types
of securities, including non-convertible
preferred stocks and debt securities rated
investment grade by a nationally recognized
statistical rating organization. Fundamental
Growth Fund may invest in government and
money market securities, including
repurchase agreements, or cash, in such
proportions as, in the opinion of
management, prevailing market or economic
conditions warrant.
Fundamental Growth Fund may use certain
techniques to hedge its portfolio or enhance
its return that Fund For Tomorrow does not
use. Specifically, Fundamental Growth Fund
may purchase put and call options on
securities and securities indices, write put
options on securities and securities
indices, engage in transactions in financial
futures contracts and related options, and
purchase securities on a when issued or
delayed delivery basis. Both Funds may write
covered call options; however, Fund For
Tomorrow may not write covered call options
on underlying securities having a value
exceeding 15% of the value of its total
assets. Fundamental Growth Fund is not
subject to a similar restriction.
Fundamental Growth Fund and Fund For
Tomorrow are each subject to a fundamental
investment restriction, which provides that
the Fund may borrow from banks in amounts up
to 33 1/3% of its total assets taken at
market value and may borrow an additional 5%
of its total assets for temporary purposes.
As a non-fundamental restriction,
Fundamental Growth Fund may not borrow
amounts in excess of 20% of its assets, and
then only from banks as a temporary measure
for extraordinary or emergency purposes.
Additionally, Fundamental Growth Fund will
not purchase securities while borrowings are
outstanding. As a non-fundamental
restriction Fund For Tomorrow may not borrow
amounts in excess of 5% of its assets.
Additionally, neither Fund may pledge any of
its respective assets other than to secure
permitted borrowings. Fund For Tomorrow's
ability to pledge its assets is further
limited and it may not pledge securities
having a value of more than 10% of the
Fund's assets to secure permitted
borrowings.
ADVISORY FEES. The investment adviser for
both Fund For Tomorrow and Fundamental
Growth Fund is MLAM. MLAM is responsible for
7
the management of each Fund's investment
portfolio and for providing administrative
services to each Fund.
Lawrence R. Fuller serves as portfolio
manager for each Fund. Mr. Fuller has served
as Portfolio Manager of Fundamental Growth
Fund since its commencement of operations
and of Fund For Tomorrow since June 1998.
Mr. Fuller was appointed First Vice
President of MLAM in 1997; prior to that he
was a Vice President of MLAM or its
predecessors since 1992.
Pursuant to a separate management agreement
between each Fund and MLAM, Fundamental
Growth Fund pays MLAM a monthly fee at the
annual rate of 0.65% of the average daily
net assets of the Fund; Fund For Tomorrow
pays MLAM a monthly fee based upon the
average daily value of the Fund's net assets
at the following annual rates: 0.65% of the
average daily net assets not exceeding $750
million; 0.60% of the average daily net
assets exceeding $750 million but not
exceeding $1 billion; and 0.55% of the
average daily net assets exceeding $1
billion. If these asset levels were met,
Fund For Tomorrow would pay advisory fees at
a lower rate than Fundamental Growth Fund.
Unlike Fund For Tomorrow's advisory fee
schedule, Fundamental Growth Fund's advisory
fee schedule does not have any breakpoints.
However, because Fund For Tomorrow's assets,
as of June 30, 1998, were approximately
$311.6 million, the first breakpoint was not
reached and both Funds had the same
effective annual fee rate of 0.65% of
average daily net assets. Assuming the total
net assets after the Reorganization were
approximately $1.4 billion, the effective
fee rate applicable to the Combined Fund
would be 0.65%. See "Summary -- Pro Forma
Fee Tables" and "Comparison of the Funds --
Management."
MLAM has retained Merrill Lynch Asset
Management U.K. Limited ("MLAM U.K.") as
sub-adviser to each of the Funds. Pursuant
to a separate sub-advisory agreement between
MLAM and MLAM U.K. with respect to each
Fund, MLAM pays MLAM U.K. a fee for
providing investment advisory services to
MLAM with respect to each Fund, in an amount
to be determined from time to time by MLAM
and MLAM U.K. but in no event in excess of
the amount MLAM actually receives for
providing services to each Fund pursuant to
each management agreement.
CLASS STRUCTURE. Each Fund offers four
classes of shares under the Merrill Lynch
Select Pricing(SM) System. The Class A, Class
B, Class C and Class D shares issued by
Fundamental Growth Fund are identical in all
respects to the Class A, Class B, Class C
and Class D shares issued by Fund For
Tomorrow, except that they represent
ownership interests in a different
investment portfolio. See "Comparison of the
Funds -- Purchase of Shares."
OVERALL EXPENSE RATIO. The overall operating
expense ratio for Class A shares as of June
30, 1998 was 0.93% for Fund For Tomorrow and
0.83% for Fundamental Growth Fund. If the
Reorganization had taken place on that date,
the overall operating expense ratio for
Class A shares of the Combined Fund on a pro
forma basis would have been 0.82%.
The foregoing expense ratios are for Class A
shares. Such ratios would differ for Class
B, Class C and Class D shares as a result of
class
8
specific distribution and account
maintenance expenditures. See "Summary --
Pro Forma Fee Tables."
PURCHASE OF SHARES. Shares of Fundamental
Growth Fund are offered continuously for
sale to the public in substantially the same
manner as shares of Fund For Tomorrow. See
"Comparison of the Funds -- Purchase of
Shares."
REDEMPTION OF SHARES. The redemption
procedures for shares of Fundamental Growth
Fund are substantially the same as the
redemption procedures for shares of Fund For
Tomorrow. For purposes of computing any CDSC
that may be payable upon disposition of
Corresponding Shares of Fundamental Growth
Fund acquired by Fund For Tomorrow
stockholders in the Reorganization, the
holding period of Fund For Tomorrow shares
outstanding on the date the Reorganization
takes place will be "tacked" onto the
holding period of the Corresponding Shares
of Fundamental Growth Fund acquired in the
Reorganization. See "Comparison of the Funds
-- Redemption of Shares."
DIVIDENDS AND DISTRIBUTIONS. Fund For
Tomorrow's policies with respect to
dividends and distributions are
substantially the same as those of
Fundamental Growth Fund. See "Comparison of
the Funds -- Dividends and Distributions."
NET ASSET VALUE. Both Fund For Tomorrow and
Fundamental Growth Fund determine net asset
value of each class of shares once daily 15
minutes after the close of business on the
New York Stock Exchange (the "NYSE")
(generally, 4:00 p.m. New York time), on
each day during which the NYSE is open for
trading. Both Funds compute net asset value
per share in the same manner. See
"Comparison of the Funds -- Additional
Information -- Net Asset Value."
VOTING RIGHTS. The corresponding voting
rights of the holders of shares of common
stock of each Fund are substantially the
same. See "The Reorganization -- Comparison
of the Funds -- Capital Stock."
OTHER SIGNIFICANT CONSIDERATIONS.
Stockholder services, including exchange
privileges, available to Fund For Tomorrow
and Fundamental Growth Fund stockholders are
substantially the same. See "Comparison of
the Funds -- Additional Information --
Stockholder Services." An automatic dividend
reinvestment plan is available to
stockholders of both Funds. The plans are
identical. See "Comparison of the Funds --
Automatic Dividend Reinvestment Plan." Other
stockholder services, including the
provision of annual and semi-annual reports,
are the same for both Funds. See "Comparison
of the Funds -- Stockholder Services."
TAX CONSIDERATIONS.............. Fund For Tomorrow and Fundamental Growth
Fund jointly have requested a private letter
ruling from the Internal Revenue Service
("IRS") with respect to the Reorganization to
the effect that, among other things, neither
Fund For Tomorrow nor Fundamental Growth Fund
will recognize gain or loss on the
transaction, and Fund For Tomorrow
stockholders will not recognize gain or loss
on the exchange of their shares of Fund For
Tomorrow for Corresponding Shares of
Fundamental Growth Fund. The consummation of
the Reorganization is subject to the receipt
of such ruling or receipt of an opinion of
counsel to the same effect. The
Reorganization will not affect the status of
Fundamental Growth Fund as a regulated
investment company. See "The Reorganization
-- Tax Consequences of the Reorganization."
9
RISK FACTORS AND SPECIAL CONSIDERATIONS
Many of the investment risks associated with an investment in Fundamental
Growth Fund are substantially the same as those of Fund For Tomorrow. A
discussion of certain principal differences in risks, as a result of the
differing techniques utilized by the Funds follows.
INVESTING IN SMALLER CAPITALIZED COMPANIES. Each Fund may invest in small
capitalization stocks, although Fundamental Growth Fund invests primarily in
medium to large capitalization stocks. Investments in securities of smaller
capitalized companies involve special considerations and risks, including risks
associated with limited product lines, markets or financial and management
resources; risks associated with less frequency and volume of trading of stocks
of smaller capitalized issuers as compared to larger capitalized issuers and
the greater effect of abrupt or erratic price movements on smaller capitalized
issuers; and risks associated with the greater sensitivity of smaller
capitalized issuers to market changes.
INVESTING ON AN INTERNATIONAL BASIS. Because up to 10% of Fundamental
Growth Fund's total assets and 25% of Fund For Tomorrow's assets may be
invested in securities of non-U.S. issuers, investors should be aware of
certain risk factors and special considerations relating to international
investing, which may involve risks that are not typically associated with
investments in securities of U.S. issuers, including fluctuations in foreign
exchange rates, future political and economic developments, different legal
systems and the possible imposition of economic sanctions, exchange controls or
other foreign governmental laws or restrictions. Securities prices in different
countries are subject to different economic, financial, political and social
factors. Since both Funds invest in securities denominated or quoted in
currencies other than the U.S. dollar, changes in foreign currency exchange
rates will affect the value of securities in each Fund and the unrealized
appreciation or depreciation of investments. Currencies of certain countries
may be volatile and, therefore, may affect the value of securities denominated
in such currencies. In addition, with respect to certain foreign countries,
there is the possibility of expropriation of assets, confiscatory taxation,
difficulty in obtaining or enforcing a court judgment, economic, political or
social instability or diplomatic developments that could affect investments in
those countries. Moreover, individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product, rates of inflation, capital reinvestment, resources, self-sufficiency
and balance of payments position. Income and capital gains on securities held
by the Funds may be subject to withholding and other taxes imposed by certain
jurisdictions, which would reduce the return to the respective Fund on those
securities. Tax conventions between certain countries and the United States may
reduce or eliminate such taxes.
As a result of these potential risks, MLAM may determine that,
notwithstanding otherwise favorable investment criteria, it may not be
practicable or appropriate to invest in a particular country. The Funds may
invest in countries in which foreign investors, including MLAM, have had no or
limited prior experience.
Many of the foreign securities held by the Funds will not be registered
with the Commission, nor will the issuers thereof be subject to the reporting
requirements of such agency. Accordingly, there may be less publicly available
information about a foreign issuer than about a U.S. issuer and such foreign
issuers may not be subject to accounting, auditing and financial reporting
standards and requirements comparable to those of U.S. issuers. As a result,
traditional investment measurements, such as price/earnings ratios, as used in
the United States, may not be applicable to certain foreign capital markets.
Foreign financial markets, while often growing in trading volume, have,
for the most part, substantially less volume than U.S. markets, and securities
of many foreign companies are less liquid and their prices may be more volatile
than securities of comparable domestic companies. Foreign markets also have
different clearance and settlement procedures, and in certain markets there
have been times when settlements have failed to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions.
Further, satisfactory custodial services for investment securities may not be
available in some countries, which may result in the Funds incurring additional
costs and delays in transporting and custodying such securities outside such
countries. Delays in settlement could result in periods when assets of the
Funds are uninvested and no return is earned thereon. The inability of the
Funds to make intended security purchases due to settlement problems or the
risk of intermediary counterparty failures could cause the Funds to miss
attractive investment opportunities. The inability to dispose of a portfolio
security due to settlement problems could result either in losses to the Funds
due to subsequent declines in the value of such portfolio security or, if a
contract to sell the security has been entered, could result in possible
liability to the purchaser.
There generally is less governmental supervision and regulation of
exchanges, brokers and issuers in foreign countries than there is in the United
States. For example, there may be no comparable provisions under certain
foreign laws to insider trading and similar investor protection securities laws
that apply with respect to securities transactions consummated in the United
States. Further, brokerage commissions and other transaction costs on foreign
securities exchanges generally are higher than in the United States.
10
Some countries prohibit or impose substantial restrictions on investments
in their capital markets, particularly their equity markets, by foreign
entities such as Fundamental Growth Fund. As illustrations, certain countries
require governmental approval prior to investments by foreign persons, or limit
the amount of investment by foreign persons in a company to only a specific
class of securities that may have less advantageous terms than securities of
the company available for purchase by nationals. Certain countries may restrict
investment opportunities in issuers or industries deemed important to national
interests.
In some countries, banks or other financial institutions may constitute a
substantial number of the leading companies or companies with the most actively
traded securities. The Investment Company Act limits a Fund's ability to invest
in any security of an issuer which, in its most recent fiscal year, derived
more than 15% of its revenues from "securities related activities," as defined
by the rules thereunder. These provisions may also restrict a Fund's
investments in certain foreign banks and other financial institutions.
HEDGING. Both Funds may write covered call options, however Fund For
Tomorrow is limited to writing covered call options on underlying securities
with a value not to exceed 15% of the value of its total assets. In addition,
Fundamental Growth Fund may utilize certain hedging techniques which Fund For
Tomorrow does not use. See "Investment Objectives and Policies -- Hedging
Techniques; Investment Practices Involving the Use of Options, Futures and
Other Portfolio Strategies" herein. Transactions involving options, futures,
options on futures or currencies may involve the loss of an opportunity to
profit from a price movement in the underlying asset beyond certain levels or a
price increase on other portfolio assets (in the case of transactions for
hedging purposes) or expose the Funds to potential losses that exceed the
amount originally invested in such instruments.
ILLIQUID SECURITIES. Fundamental Growth Fund and Fund For Tomorrow may
each invest up to 15% of their respective total assets in securities that lack
an established secondary trading market or otherwise are considered illiquid.
Liquidity of a security relates to the ability to dispose easily of the
security and the price to be obtained upon disposition of the security, which
may be less than would be obtained for a comparable more liquid security.
Investment of a Fund's assets in illiquid securities may restrict the ability
of a Fund to dispose of its investments in a timely fashion and for a fair
price as well as its ability to take advantage of market opportunities. The
risks associated with illiquidity will be particularly acute in situations in
which a Fund's operations require cash, such as when a Fund redeems shares or
pays dividends, and could result in a Fund borrowing to meet short-term cash
requirements or incurring capital losses on the sale of illiquid investments.
Further, issuers whose securities are not publicly traded are not subject to
the disclosure and other investor protection requirements that would be
applicable if their securities were publicly traded. In making investments in
such securities, a Fund may obtain access to material nonpublic information
which may restrict the Fund's ability to conduct portfolio transactions in such
securities. In addition, each of the Funds may invest in privately placed
securities that may or may not be freely transferable under the laws of the
applicable jurisdiction or due to contractual restrictions on resale.
11
COMPARISON OF THE FUNDS
FINANCIAL HIGHLIGHTS
FUNDAMENTAL GROWTH FUND. The financial information in the table below,
except for the six months ended February 28, 1998, which is unaudited, has been
audited in conjunction with the annual audits of the financial statements by
Ernst & Young LLP, independent auditors.
The following per share data and ratios have been derived from information
provided in the Fundamental Growth Fund's financial statements.
CLASS A++
-------------------------------------------------------
FOR THE YEAR
FOR THE SIX ENDED FOR THE PERIOD
MONTHS ENDED AUGUST 31, OCT. 21, 1994+
FEB. 28, ----------------------- TO AUG. 31,
1998 1997 1996 1995
-------------- ----------- ----------- ----------------
INCREASE (DECREASE) IN NET ASSET VALUE:
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ........ $ 17.37 $ 13.60 $ 11.66 $ 9.99
------- -------- -------- --------
Investment income (loss) -- net ............ .04 .07 .07 --+++
Realized and unrealized gain on
investments -- net ........................ 2.38 4.95 2.13 1.98
------- -------- -------- --------
Total from investment operations ............ 2.42 5.02 2.20 1.98
------- -------- -------- --------
Less distributions from realized gain on
investments -- net ......................... (2.34) (1.25) (.26) (.31)
-------- --------- --------- ---------
Net asset value, end of period .............. $ 17.45 $ 17.37 $ 13.60 $ 11.66
======== ========= ========= =========
TOTAL INVESTMENT RETURN:**
Based on net asset value per share .......... 14.65%# 39.24% 19.02% 20.55%#
======== ========= ========= =========
RATIOS TO AVERAGE NET ASSETS:
Expenses .................................... .86%* .99% 1.12% 1.46%*
======== ========= ========= =========
Investment income (loss) -- net ............. .49%* .47% .51% .02%*
======== ========= ========= =========
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)..... $ 98,908 $ 62,049 $ 47,048 $ 21,288
========== ========= ========= =========
Portfolio turnover .......................... 23.53% 94.38% 82.10% 80.41%
========== ========= ========= =========
Average commission rate paid## .............. $ .0630 $ .0628 $ .0623 --
========== ========= ========= =========
CLASS B++
----------------------------------------------------------
FOR THE YEAR
FOR THE SIX ENDED FOR THE PERIOD
MONTHS ENDED AUGUST 31, OCT. 21, 1994+
FEB. 28, --------------------------- TO AUG. 31,
1998 1997 1996 1995
-------------- ------------- ------------- ---------------
INCREASE (DECREASE) IN NET ASSET VALUE:
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ........ $ 16.69 $ 13.14 $ 11.40 $ 9.85
--------- -------- -------- --------
Investment income (loss) -- net ............ (.04) (.09) (.07) (.09)
Realized and unrealized gain on
investments -- net ........................ 2.26 4.79 2.07 1.95
---------- -------- -------- ----------
Total from investment operations ............ 2.22 4.70 2.00 1.86
---------- -------- -------- ----------
Less distributions from realized gain on
investments -- net ......................... (2.24) (1.15) (.26) (.31)
---------- -------- -------- ----------
Net asset value, end of period .............. $ 16.67 $ 16.69 $ 13.14 $ 11.40
========== ======== ======== ==========
TOTAL INVESTMENT RETURN:**
Based on net asset value per share .......... 13.97%# 37.95% 17.68% 19.60%#
========== ======== ======== ==========
RATIOS TO AVERAGE NET ASSETS:
Expenses .................................... 1.88%* 2.02% 2.16% 2.48%*
========== ======== ======== ==========
Investment income (loss) -- net ............. (.54)%* (.59)% (.54)% (.95)%*
========== ======== ======== ==========
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)..... $386,248 $216,636 $116,641 $ 63,748
========== ======== ======== ==========
Portfolio turnover .......................... 23.53% 94.38% 82.10% 80.41%
========== ======== ======== ==========
Average commission rate paid## .............. $ .0630 $ .0628 $ .0623 --
========== ========= ========= ==========
- ---------
+ Commencement of operations.
++ Based on average shares outstanding.
+++ Amount is less than $.01 per share.
* Annualized.
** Total investment returns exclude the effects of sales loads.
# Aggregate total investment return.
## For fiscal years beginning on or after September 1, 1995, the Fund is
required to disclose its average commission rate per share for purchases and
sales of equity securities.
12
FUNDAMENTAL GROWTH FUND -- FINANCIAL HIGHLIGHTS (CONCLUDED)
CLASS C++
------------------------------------------------------------------------------------
FOR THE FOR THE
SIX PERIOD
MONTHS FOR THE YEAR ENDED DEC. 24,
ENDED AUGUST 31, 1992+
FEB. 28, ----------------------------------------------------- TO AUG. 31,
1998 1997 1996 1995 1994 1993
-------------- ------------- ------------- ------------ ------------ ---------------
INCREASE (DECREASE) IN
NET ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period ........ $ 16.72 $ 13.14 $ 11.40 $ 9.96 $ 9.86 $ 10.00
--------- ------- ------- ------- ------- --------
Investment income
(loss) -- net ............. (.04) (.09) (.07) (.09) (.05) (.05)
Realized and
unrealized gain
(loss) on
investments -- net ........ 2.27 4.79 2.07 1.84 .15 (.09)
---------- -------- -------- ------- ------- ----------
Total from investment
operations ................. 2.23 4.70 2.00 1.75 .10 (.14)
---------- -------- -------- ------- ------- ----------
Less distributions from
realized gain on
investments -- net ......... (2.21) (1.12) (.26) (.31) -- --
---------- -------- -------- ------- ------- ----------
Net asset value, end of
period ..................... $ 16.74 $ 16.72 $ 13.14 $ 11.40 $ 9.96 $ 9.86
========== ======== ======== ======= ======= ==========
TOTAL INVESTMENT
RETURN:**
Based on net asset value
per share .................. 13.97%# 37.90% 17.68% 18.28% 1.01% (1.40)%#
========== ======== ======== ======= ======= ==========
RATIOS TO AVERAGE NET
ASSETS:
Expenses .................... 1.88%* 2.02% 2.15% 2.44% 2.35% 2.79%*
========== ======== ======== ======= ======= ==========
Investment income
(loss) -- net .............. (.54)%* (.58)% (.57)% (.88)% (.52)% (.83)%*
========== ======== ======== ======= ======= ==========
SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) ............. $103,879 $ 74,732 $ 54,052 $44,220 $47,263 $ 45,736
========== ======== ======== ======= ======= ==========
Portfolio turnover .......... 23.53% 94.38% 82.10% 80.41% 112.68% 64.09%
========== ======== ======== ======= ======= ==========
Average commission rate
paid## ..................... $ .0630 $ .0628 $ .0623 -- -- --
========== ========= ========= ======= ======= ==========
CLASS D++
---------------------------------------------------------------------------
FOR THE FOR THE
SIX PERIOD
MONTHS FOR THE YEAR ENDED DEC. 24,
ENDED AUGUST 31, 1992+
FEB. 28, ----------------------------------------------- TO AUG. 31,
1998 1997 1996 1995 1994 1993
------------ ----------- ----------- ----------- ----------- --------------
INCREASE (DECREASE) IN
NET ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period ........ $ 17.27 $ 13.54 $ 11.64 $ 10.09 $ 9.91 $ 10.00
------- -------- -------- ------- -------- --------
Investment income
(loss) -- net ............. .02 .03 .03 (.01) .03 --+++
Realized and
unrealized gain
(loss) on
investments -- net ........ 2.36 4.93 2.13 1.87 .15 (.09)
------- -------- -------- ------- -------- ----------
Total from investment
operations ................. 2.38 4.96 2.16 1.86 .18 (.09)
------- -------- -------- ------- -------- ----------
Less distributions from
realized gain on
investments -- net ......... (2.32) (1.23) (.26) (.31) -- --
-------- --------- --------- ------- --------- ----------
Net asset value, end of
period ..................... $ 17.33 $ 17.27 $ 13.54 $ 11.64 $ 10.09 $ 9.91
======== ========= ========= ======= ========= ==========
TOTAL INVESTMENT
RETURN:**
Based on net asset value
per share .................. 14.47%# 38.90% 18.70% 19.15% 1.82% (.90)%#
======== ========= ========= ======= ========= ==========
RATIOS TO AVERAGE NET
ASSETS:
Expenses .................... 1.11%* 1.24% 1.37% 1.65% 1.58% 2.03%*
======== ========= ========= ======= ========= ==========
Investment income
(loss) -- net .............. .23%* .17% .24% (.10)% .31% (.04)%*
======== ========= ========= ======= ========= ==========
SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) ............. $ 88,201 $ 53,101 $22,892 $13,231 $ 8,623 $ 6,930
========== ========= ========= ======= ========= ==========
Portfolio turnover .......... 23.53% 94.38% 82.10% 80.41% 112.68% 64.09%
========== ========= ========= ======= ========= ==========
Average commission rate
paid## ..................... $ .0630 $ .0628 $ .0623 -- -- --
========== ========= ========= ======= ========= ==========
- ---------
+ Commencement of operations.
++ Based on average shares outstanding.
+++ Amount is less than $.01 per share.
* Annualized.
** Total investment returns exclude the effects of sales loads.
# Aggregate total investment return.
## For fiscal years beginning on or after September 1, 1995, the Fund is
required to disclose its average commission rate per share for purchases and
sales of equity securities.
13
FUND FOR TOMORROW. The financial information in the table below has been
audited in conjunction with the annual audits of the financial statements of
Fund For Tomorrow by Deloitte & Touche LLP, independent auditors.
The following per share data and ratios have been derived from information
provided in Fund For Tomorrow's audited Financial Statements:
CLASS A
-------------------------------------------------
FOR THE YEAR ENDED JANUARY 31,
-------------------------------------------------
1998++ 1997++ 1996++ 1995++
----------- ----------- ----------- -------------
INCREASE (DECREASE) IN NET ASSET
VALUE:
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period..... $ 17.16 $ 16.26 $ 13.55 $ 16.39
-------- -------- ------- ---------
Investment income -- net ................ .07 .08 .07 .09
Realized and unrealized gain (loss)
on investments and foreign
currency transactions -- net ........... 1.99 3.04 4.19 ( 1.97)
-------- -------- ------- ---------
Total from investment operations ........ 2.06 3.12 4.26 ( 1.88)
-------- -------- ------- ---------
Less dividends and distributions:
Investment income -- net ............... -- -- -- --
Realized gain on investments --
net ................................... (3.61) (2.22) (1.55) (.96)
--------- --------- ------- ---------
Total dividends and distributions ....... (3.61) (2.22) (1.55) (.96)
--------- --------- ------- ---------
Net asset value, end of period .......... $ 15.61 $ 17.16 $ 16.26 $ 13.55
========= ========= ======= =========
TOTAL INVESTMENT RETURN:**
Based on net asset value per share ...... 12.43% 19.99% 31.82% (11.23)%
========= ========= ======= =========
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................ .99% 1.00% 1.07% .98%
========= ========= ======= =========
Investment income -- net ................ .40% .46% .44% .59%
========= ========= ======= =========
SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) ............................. $ 13,552 $ 39,605 $34,231 $ 8,665
========= ========= ======= =========
Portfolio turnover ...................... 17.63% 39.96% 67.38% 45.86%
========= ========= ======= =========
Average commission rate paid## .......... $ .0003 $ .0277 -- --
========= ========= ======= =========
CLASS A
-------------------------------------------------------------------------
FOR THE YEAR ENDED JANUARY 31,
-------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989+
----------- ----------- ----------- ----------- ----------- -------------
INCREASE (DECREASE) IN NET ASSET
VALUE:
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period..... $ 16.29 $ 16.84 $ 15.49 $ 15.26 $ 14.96 $ 16.05
------- ------- ------- ------- ------- --------
Investment income -- net ................ .15 .25 .36 .41 .30 .08
Realized and unrealized gain (loss)
on investments and foreign
currency transactions -- net ........... 2.18 .49 3.74 .59 1.45 .43
------- ------- ------- ------- ------- --------
Total from investment operations ........ 2.33 .74 4.10 1.00 1.75 .51
------- ------- ------- ------- ------- --------
Less dividends and distributions:
Investment income -- net ............... -- (.23) (.35) (.40) (.41) (.13)
Realized gain on investments --
net ................................... (2.23) (1.06) (2.40) (.37) (1.04) (1.47)
------- ------- -------- -------- -------- ---------
Total dividends and distributions ....... (2.23) (1.29) (2.75) (.77) (1.45) (1.60)
------- ------- -------- -------- -------- ---------
Net asset value, end of period .......... $ 16.39 $ 16.29 $ 16.84 $ 15.49 $ 15.26 $ 14.96
======= ======= ======== ======== ======== =========
TOTAL INVESTMENT RETURN:**
Based on net asset value per share ...... 15.78% 4.79% 28.35% 6.64% 10.92% 3.90%#
======= ======= ======== ======== ======== =========
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................ .88% .90% .95% .96% .89% .91%*
======= ======= ======== ======== ======== =========
Investment income -- net ................ .95% 1.35% 1.81% 2.58% 2.20% 1.87%*
======= ======= ======== ======== ======== =========
SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) ............................. $10,942 $11,394 $ 8,846 $ 5,478 $ 4,466 $ 476
======= ======= ======== ======== ======== =========
Portfolio turnover ...................... 48.63% 40.58% 48.28% 25.57% 15.23% 10.26%
======= ======= ======== ======== ======== =========
Average commission rate paid## .......... -- -- -- -- -- --
======= ======= ======== ======== ======== =========
- ---------
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Class A shares commenced operations on October 26, 1988.
++ Based on average shares outstanding.
# Aggregate total investment return.
## For fiscal years beginning on or after September 1, 1995, the Fund is
required to disclose its average commission rate per share for purchases and
sales of equity securities. The "Average Commission Rate Paid" includes
commissions paid in foreign currencies, which have been converted into U.S.
dollars using the prevailing exchange rate on the date of the transaction.
Such conversions may significantly affect the rate shown.
14
FUND FOR TOMORROW -- FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
-------------------------------------------------------
FOR THE YEAR ENDED JANUARY 31,
-------------------------------------------------------
1998+ 1997+ 1996+ 1995+
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET
ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period ............................. $ 16.59 $ 15.79 $ 13.33 $ 16.30
------- -------- ------- --------
Investment income (loss) -- net...... (.13) (.10) (.08) (.06)
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions -- net ................ 1.92 2.95 4.09 (1.96)
-------- -------- ------- --------
Total from investment
operations ......................... 1.79 2.85 4.01 (2.02)
-------- -------- ------- --------
Less dividends and distributions:
Investment income -- net ........... -- -- -- --
Realized gain on
investments -- net ................ (3.37) (2.05) (1.55) (.95)
-------- -------- ------- --------
Total dividends and
distributions ...................... (3.37) (2.05) (1.55) (.95)
-------- -------- ------- --------
Net asset value, end of period ...... $ 15.01 $ 16.59 $ 15.79 $ 13.33
======== ======== ======= ========
TOTAL INVESTMENT RETURN:*
Based on net asset value per
share .............................. 11.20% 18.80% 30.43% (12.22)%
======== ======== ======= ========
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................ 2.03% 2.06% 2.13% 1.99%
======== ======== ======= ========
Investment income (loss) -- net...... (.74)% (.58)% (.55)% (.38)%
======== ======== ======= ========
SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) ......................... $ 60,646 $104,828 $112,239 $119,186
======== ======== ======== ========
Portfolio turnover .................. 17.63% 39.96% 67.38% 45.86%
======== ======== ======== ========
Average commission rate paid# ....... $ .0003 $ .0277 -- --
========= ========= ======== ========
CLASS B
-----------------------------------------------------------------------------
FOR THE YEAR ENDED JANUARY 31,
-----------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989
------------- ------------ ------------ ------------ ------------ -----------
INCREASE (DECREASE) IN NET
ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period ............................. $ 16.28 $ 16.82 $ 15.48 $ 15.24 $ 14.94 $ 13.78
------- ------- ------- ------- ------- --------
Investment income (loss) -- net...... (.01) .06 .14 .24 .21 .20
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions -- net ................ 2.17 .52 3.77 .60 1.36 2.72
------- ------- ------- ------- ------- --------
Total from investment
operations ......................... 2.16 .58 3.91 .84 1.57 2.92
------- ------- ------- ------- ------- --------
Less dividends and distributions:
Investment income -- net ........... -- (.06) (.17) (.23) (.23) (.20)
Realized gain on
investments -- net ................ ( 2.14) ( 1.06) ( 2.40) (.37) ( 1.04) ( 1.56)
------- -------- -------- -------- -------- --------
Total dividends and
distributions ...................... ( 2.14) ( 1.12) ( 2.57) (.60) ( 1.27) ( 1.76)
------- -------- -------- -------- -------- --------
Net asset value, end of period ...... $ 16.30 $ 16.28 $ 16.82 $ 15.48 $ 15.24 $ 14.94
======= ======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN:*
Based on net asset value per
share .............................. 14.60% 3.75% 26.96% 5.59% 9.77% 22.11%
======= ======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................ 1.91% 1.92% 1.98% 2.00% 1.93% 1.96%
======= ======== ======== ======== ======== ========
Investment income (loss) -- net...... ( .07)% .36% .83% 1.53% 1.20% 1.18%
======= ======== ======== ======== ======== ========
SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) ......................... $396,424 $447,186 $476,106 $442,944 $516,402 $562,899
======== ======== ======== ======== ======== ========
Portfolio turnover .................. 48.63% 40.58% 48.28% 25.57% 15.23% 10.26%
======== ======== ======== ======== ======== ========
Average commission rate paid# ....... -- -- -- -- -- --
======== ======== ======== ======== ======== ========
- ---------
* Total investment returns exclude the effects of sales loads.
+ Based on average shares outstanding.
# For fiscal years beginning on or after September 1, 1995, the Fund is
required to disclose its average commission rate per share for purchases and
sales of equity securities. The "Average Commission Rate Paid" includes
commissions paid in foreign currencies, which have been converted into U.S.
dollars using the prevailing exchange rate on the date of the transaction.
Such conversions may significantly affect the rate shown.
15
FUND FOR TOMORROW -- FINANCIAL HIGHLIGHTS (CONCLUDED)
CLASS C++
--------------------------------------------------------
FOR THE YEAR ENDED FOR THE PERIOD
JANUARY 31, OCTOBER 21,
--------------------------------------- 1994+ TO
JANUARY 31,
1998 1997 1996 1995
------------- ------------- ----------- ----------------
INCREASE (DECREASE) IN NET
ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period ............................ $ 16.47 $ 15.71 $ 13.28 $ 14.08
------- ------- -------- --------
Investment income
(loss) -- net ..................... (.11) (.10) (.10) (.04)
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions -- net ............... 1.88 2.94 4.08 (.54)
-------- -------- -------- ----------
Total from investment
operations ......................... 1.77 2.84 3.98 (.58)
-------- -------- -------- ----------
Less distributions from realized
gains on investments -- net ........ ( 3.30) ( 2.08) ( 1.55) (.22)
-------- -------- -------- ----------
Net asset value, end of period ...... $ 14.94 $ 16.47 $ 15.71 $ 13.28
======== ======== ======== ==========
TOTAL INVESTMENT RETURN:**
Based on net asset value per
share .............................. 11.15% 18.80% 30.32% ( 4.12)%#
======== ======== ======== ==========
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................ 2.06% 2.07% 2.14% 2.26%*
======== ======== ======== ==========
Investment income (loss) -- net ..... (.68)% (.61)% (.67)% (.87)%*
======== ======== ======== ==========
SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) ......................... $ 2,926 $ 8,430 $ 6,385 $ 80
======== ======== ======== ==========
Portfolio turnover .................. 17.63% 39.96% 67.38% 45.86%
======== ======== ======== ==========
Average commission rate paid##....... $ .0003 $ .0277 -- --
========= ========= ======== ==========
CLASS D++
--------------------------------------------------------
FOR THE PERIOD
FOR THE YEAR ENDED OCTOBER 21,
JANUARY 31, 1994+ TO
---------------------------------------- JANUARY 31,
1998 1997 1996 1995
------------- ------------- ------------ ---------------
INCREASE (DECREASE) IN NET
ASSET VALUE:
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period ............................ $ 17.09 $ 16.20 $ 13.54 $ 14.26
--------- -------- ------- --------
Investment income
(loss) -- net ..................... --+++ .04 .03 (.01)
Realized and unrealized gain
(loss) on investments and
foreign currency
transactions -- net ............... 1.99 3.03 4.18 (.49)
--------- -------- ------- ----------
Total from investment
operations ......................... 1.99 3.07 4.21 (.50)
--------- -------- ------- ----------
Less distributions from realized
gains on investments -- net ........ ( 3.56) ( 2.18) ( 1.55) (.22)
--------- -------- -------- ----------
Net asset value, end of period ...... $ 15.52 $ 17.09 $ 16.20 $ 13.54
========= ======== ======== ==========
TOTAL INVESTMENT RETURN:**
Based on net asset value per
share .............................. 12.07% 19.73% 31.47% (3.50)%#
========= ======== ======== ==========
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................ 1.23% 1.25% 1.33% 1.43%*
========= ======== ======== ==========
Investment income (loss) -- net ..... (.01)%+ .22%+ .22% (.23)%*
========= ======== ======== ==========
SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) ......................... $ 231,695 $ 238,260 $227,908 $ 156,947
========== ========== ======== ==========
Portfolio turnover .................. 17.63% 39.96% 67.38% 45.86%
========== ========== ======== ==========
Average commission rate paid##....... $ .0003 $ .0277 -- --
========== ========== ======== ==========
- ---------
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of Operations.
++ Based on average shares outstanding.
+++ Amount is less than $(.01) per share.
# Aggregate total investment return.
## For fiscal years beginning on or after September 1, 1995, the Fund is
required to disclose its average commission rate per share for purchases and
sales of equity securities. The "Average Commission Rate Paid" includes
commissions paid in foreign currencies, which have been converted into U.S.
dollars using the prevailing exchange rate on the date of the transaction.
Such conversions may significantly affect the rate shown.
16
INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT OBJECTIVES. The investment objective of Fundamental Growth Fund
and Fund For Tomorrow is to provide stockholders with long-term growth of
capital by investing primarily in equity securities.
INVESTMENT POLICIES GENERALLY. Fundamental Growth Fund seeks to invest in
a diversified portfolio of equity securities placing particular emphasis on
companies that have exhibited above-average growth rates in earnings, resulting
from a variety of factors including, but not limited to, above-average growth
rates in sales, profit margin improvement, proprietary or niche products or
services, leading market shares, and underlying strong industry growth. Fund
For Tomorrow seeks to invest in a quality-oriented portfolio of securities,
primarily common stock. In pursuing this objective, Fund For Tomorrow uses a
thematic approach of investing in long-term trends, seeking to identify
important investment concepts of the future and reviewing existing concepts to
confirm their validity in meeting the Fund's objective. As part of this
thematic approach, Fund For Tomorrow seeks to identify companies whose products
and services are believed to represent attractive investment opportunities.
There can be no assurance that, after the Reorganization, Fundamental
Growth Fund will achieve its investment objective.
Fundamental Growth Fund seeks to invest in a diversified portfolio of
equity securities placing particular emphasis on companies that have exhibited
above-average growth rates in earnings. Emphasis will be given to companies
having stock market capitalizations of $500 million or more. Fundamental Growth
Fund invests primarily in common stock, and to a lesser extent, securities
convertible into common stock and rights to subscribe for common stock.
Fundamental Growth Fund will maintain at least 65% of its total assets invested
in equity securities, except during defensive periods. Fundamental Growth Fund
reserves the right as a defensive measure and to provide for redemptions to
hold other types of securities, including non-convertible preferred stocks and
debt securities rated investment grade by a nationally recognized statistical
rating organization, U. S. Government and money market securities, including
repurchase agreements or cash, in such proportions as, in the opinion of
management, prevailing market or economic conditions warrant.
Fund For Tomorrow invests primarily in common stocks of companies whose
products and services are believed to represent attractive investment
opportunities in accordance with Fund For Tomorrow's thematic approach of
investing in long-term trends. Fund For Tomorrow may invest in securities
issued by companies of any size, without regard to capitalization. When
management deems it advisable to do so, Fund For Tomorrow may invest in
securities other than common stocks, including but not limited to convertible
securities, preferred stocks and bonds. Fund For Tomorrow does not presently
intend to purchase bonds rated lower than BBB by S&P or Baa by Moody's. Fund
For Tomorrow reserves the right to invest, temporarily, all or a portion of its
assets in high quality money market securities for purposes of enhancing
liquidity and avoiding the effects of declining stock prices when it seems
advisable to do so in light of prevailing market or economic conditions. The
proportion of Fund For Tomorrow's assets that is invested in money market
securities will vary from time to time.
MLAM believes that the securities currently held in the Fund For Tomorrow
portfolio are consistent with the investment objectives and policies of
Fundamental Growth Fund and are not prohibited by the investment restrictions
of Fundamental Growth Fund. Fundamental Growth Fund has no plan or intention to
sell or otherwise dispose of any of the assets of Fund For Tomorrow acquired in
the Reorganization, except for dispositions made in the ordinary course of
business.
A more specific comparison of the investment policies of Fund For Tomorrow
and Fundamental Growth Fund follows.
FOREIGN SECURITIES. Each Fund may invest in foreign securities. Fund For
Tomorrow may invest up to 25% of total assets in securities of foreign issuers,
including issuers in foreign countries with smaller capital markets.
Fundamental Growth Fund may invest up to 10% of its assets in the securities of
foreign issuers (this limitation does not apply to ADRs). See "Risk Factors and
Special Considerations -- Investing on an International Basis."
HEDGING TECHNIQUES; INVESTMENT PRACTICES INVOLVING THE USE OF OPTIONS,
FUTURES AND OTHER PORTFOLIO STRATEGIES. Fundamental Growth Fund may use certain
techniques to hedge its portfolio or enhance its return that Fund For Tomorrow
does not use. Specifically, Fundamental Growth Fund may purchase put and call
options on securities and securities indices, write put options on securities
and securities indices, engage in transactions in financial futures contracts
and related options, and purchase securities on a when issued or delayed
delivery basis. Other than with respect to closing transactions, Fundamental
Growth Fund will only write call or put options that are "covered." Fund For
Tomorrow may write covered call options, however, the underlying securities may
not exceed 15% of the value of its total assets. Fundamental Growth Fund is not
subject to a similar restriction. For a more detailed description of hedging
instruments and risks associated with investment therein, see "Investment
Objective and Policies -- Other Investment Policies and Practices" in the
Fundamental Growth Fund Prospectus. Also see "Risk Factors and Special
Considerations -- Hedging" herein.
17
CONVERTIBLE SECURITIES. Each of the Funds may invest in convertible
securities. A convertible security is a bond, debenture, note, preferred stock
or other security that may be converted into or exchanged for a prescribed
amount of common stock of the same or a different issuer within a particular
period of time at a specified price or formula. A convertible security entitles
the holder to receive interest generally paid or accrued on debt or the
dividend paid on preferred stock until the convertible security matures or is
redeemed, converted or exchanged. Convertible securities have several unique
investment characteristics such as (i) higher yields than common stocks, but
lower yields than comparable nonconvertible securities, (ii) a lesser degree of
fluctuation in value than the underlying stock since they have fixed-income
characteristics, and (iii) the potential for capital appreciation if the market
price of the underlying common stock increases. A convertible security might be
subject to redemption at the option of the issuer at a price established in the
convertible security's governing instrument. If a convertible security held by
one of the Funds is called for redemption, the Fund may be required to permit
the issuer to redeem the security, convert it into the underlying common stock
or sell it to a third party.
OTHER INVESTMENT POLICIES
Both Fund For Tomorrow and Fundamental Growth Fund have adopted certain
other investment policies as set forth below:
BORROWINGS. Fund For Tomorrow and Fundamental Growth Fund, as a
fundamental restriction, may each borrow amounts not in excess of 33 1/3% of
its total assets from banks. As a non-fundamental restriction, however, Fund
For Tomorrow may not borrow amounts in excess of 5% of the value of the Fund's
total assets and Fundamental Growth Fund may not borrow amounts in excess of
20% of its total assets. Under the applicable non-fundamental restriction,
Fundamental Growth Fund may borrow only from banks as a temporary measure for
extraordinary or emergency purposes. Additionally, neither Fund may pledge any
of its respective assets other than to secure permitted borrowings. Fund For
Tomorrow's ability to pledge its assets is further limited to pledging
securities having a value of not more than 10% of the Fund's assets to secure
permitted borrowings.
LENDING OF PORTFOLIO SECURITIES. Each Fund may from time to time lend
securities from its portfolio to banks, brokers and other financial
institutions and receive collateral in cash or securities issued or guaranteed
by the U.S. Government.
INVESTMENT RESTRICTIONS
Other than as noted above under "Comparison of the Funds -- Investment
Objectives and Policies," Fund For Tomorrow and Fundamental Growth Fund have
identical investment restrictions. See, "Investment Objective and Policies --
Investment Restrictions" in the Fundamental Growth Fund Statement and
"Investment Practices and Restrictions -- Investment Restrictions" in the Fund
For Tomorrow Statement.
MANAGEMENT
DIRECTORS. The Board of Directors of each of Fundamental Growth Fund and
Fund For Tomorrow consists of six individuals, five of whom are not "interested
persons" as defined in the Investment Company Act. One individual, Arthur
Zeikel, serves on both Boards. After the Reorganization, the Board of Directors
of Fundamental Growth Fund will serve as the Board of Directors of the Combined
Fund. The Directors are responsible for the overall supervision of the
operation of each Fund and perform the various duties imposed on the directors
of investment companies by the Investment Company Act.
The Directors of Fundamental Growth Fund are:
ARTHUR ZEIKEL* -- Chairman of the Investment Adviser and Fund Asset
Management, L.P. ("FAM") (which terms as used herein include their corporate
predecessors) since 1997; President of the Investment Adviser and FAM from 1977
to 1997; Chairman of Princeton Services, Inc. ("Princeton Services") since 1997
and Director thereof since 1993; President of Princeton Services from 1993 to
1997; Executive Vice President of Merrill Lynch & Co., Inc. ("ML & Co.") since
1990.
JOE GRILLS -- Member of the Committee of Investment of Employee Benefit
Assets of the Financial Executives Institute ("CIEBA") since 1986; Member of
CIEBA's Executive Committee since 1988 and its Chairman from 1991 to 1992;
Assistant Treasurer of International Business Machines Corporation ("IBM") and
Chief Investment Officer of IBM Retirement Funds 1986 to 1993; Member of the
Investment Advisory Committees of the State of New York Common Retirement Fund
and the Howard Hughes Medical Institute since 1997; Director, Duke Management
Company since 1992, elected Vice Chairman in 1998; Director, LaSalle Street
Fund since 1995; Director, Hotchkis and Wiley Mutual Funds since 1996;
Director, Kimco Realty Corporation since 1997; Member of the Investment
Advisory Committee of the Virginia Retirement System since 1998.
18
WALTER MINTZ -- Special Limited Partner of Cumberland Associates
(investment partnership) since 1982.
ROBERT S. SALOMON, JR. -- Principal of STI Management (investment
adviser); Chairman and CEO of Salomon Brothers Asset Management Inc. from 1992
to 1995; Chairman of Salomon Brothers equity mutual funds from 1992 to 1995;
monthly columnist with FORBES magazine since 1992; Director of Stock Research
and U.S. Equity Strategist at Salomon Brothers from 1975 to 1991; Trustee of
The Common Fund since 1980.
MELVIN R. SEIDEN -- Director of Silbanc Properties, Ltd. (real estate,
investments and consulting) since 1987; Chairman and President of Seiden & de
Cuevas, Inc. (private investment firm) from 1964 to 1987.
STEPHEN B. SWENSRUD -- Chairman, Fernwood Advisors (investment adviser)
since 1996; Principal, Fernwood Associates (financial consultant) since 1975.
- ---------
* Interested person, as defined by the Investment Company Act, of each of the
Funds.
MANAGEMENT AND ADVISORY ARRANGEMENTS. MLAM serves as the investment
adviser for Fund For Tomorrow and as the manager for Fundamental Growth Fund
pursuant to an investment advisory agreement or a management agreement, as the
case may be (each, a "Management Agreement"). Except for different fee
structures and certain other minor differences, the agreements are identical.
Pursuant to the Management Agreement between Fundamental Growth Fund and
MLAM, Fundamental Growth Fund pays MLAM a monthly fee at the annual rate of
0.65% of the average daily net assets of the Fund. Pursuant to the Management
Agreement between Fund For Tomorrow and MLAM, Fund For Tomorrow pays MLAM a
monthly fee based upon the average daily value of the Fund's net assets at the
following annual rates: 0.65% of the average daily net assets not exceeding
$750 million; 0.60% of the average daily net assets exceeding $750 million but
not exceeding $1 billion; and 0.55% of the average daily net assets exceeding
$1 billion. The pro forma effective fee rate of the Combined Fund would be
0.65%.
MLAM has retained MLAM U.K. as sub-adviser to each of Fund For Tomorrow
and Fundamental Growth Fund. Pursuant to a separate sub-advisory agreement
between MLAM and MLAM U.K. with respect to each Fund, MLAM pays MLAM U.K. a fee
for providing investment advisory services to MLAM with respect to each Fund,
in an amount to be determined from time to time by MLAM and MLAM U.K. but in no
event in excess of the amount MLAM actually receives for providing services to
each Fund pursuant to each Management Agreement. The address of MLAM U.K. is
Milton Gate, 1 Moor Lane, London EC2Y 9HA, England.
After the Reorganization, on a pro forma combined basis as of June 30,
1998, the total operating expenses of Fundamental Growth Fund, as a percent of
net assets, would be less than the current operating expenses for Fund For
Tomorrow. In addition, certain fixed costs, such as costs of printing
stockholder reports and proxy statements, legal expenses, audit fees,
registration fees, mailing costs and other expenses would be spread across a
larger asset base, thereby lowering the expense ratio borne by Fund For
Tomorrow stockholders. MLAM believes that the Reorganization is in the best
interest of both Fundamental Growth Fund and Fund For Tomorrow stockholders.
See "The Reorganization -- Potential Benefits to Stockholders as a Result of
the Reorganization" and "Summary -- Pro Forma Fee Tables."
PURCHASE OF SHARES
The class structure and purchase and distribution procedures for shares of
Fund For Tomorrow are identical to those of Fundamental Growth Fund. For a
complete discussion of the four classes of shares and the purchase and
distribution procedures related thereto, see "Merrill Lynch Select Pricing(SM)
System" and "Purchase of Shares" in either the Fundamental Growth Fund
Prospectus or the Fund For Tomorrow Prospectus.
REDEMPTION OF SHARES
The procedure for redeeming shares of Fundamental Growth Fund is identical
to the procedure for redeeming shares of Fund For Tomorrow. For purposes of
computing any CDSC that may be payable upon disposition of Corresponding Shares
of Fundamental Growth Fund acquired by Fund For Tomorrow stockholders in the
Reorganization, the holding period of Fund For Tomorrow shares outstanding on
the date the Reorganization takes place will be tacked onto the holding period
of the Corresponding Shares of Fundamental Growth Fund acquired in the
Reorganization.
19
PERFORMANCE
GENERAL. The following tables provide performance information for each
class of shares of Fund For Tomorrow and Fundamental Growth Fund, including and
excluding maximum applicable sales charges, for the periods indicated. Past
performance is not indicative of future performance.
FUNDAMENTAL GROWTH FUND
AVERAGE ANNUAL TOTAL RETURN
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS D SHARES
------------------------ ------------------------ ------------------------ -----------------------
WITHOUT WITHOUT WITHOUT WITHOUT
SALES WITH SALES SALES WITH SALES SALES WITH SALES SALES WITH SALES
PERIOD CHARGE(%) CHARGE*(%) CHARGE(%) CHARGE*(%) CHARGE(%) CHARGE*(%) CHARGE(%) CHARGE*(%)
- ------------------- ----------- ------------ ----------- ------------ ----------- ------------ ----------- -----------
10 months ended
6/30/98+ ......... 26.61 19.96 25.45 21.45 25.48 24.48 26.29 19.66
Year Ended
8/31/97 .......... 39.24 31.93 37.95 33.95 37.90 36.90 38.90 31.61
Inception** through
8/31/97 .......... 27.37 24.99 26.10 25.65 14.83 14.83 15.73 14.40
- ---------
* Assumes the maximum applicable sales charge. The maximum initial sales charge
on Class A and Class D shares is 5.25%. The maximum contingent deferred
sales charge ("CDSC") on Class B shares is 4.0% and is reduced to 0% after
four years. Class C shares are subject to a 1.0% CDSC for one year.
+ Aggregate total returns.
** Class A and Class B shares commenced operations on October 21, 1994. Class C
and Class D shares commenced operations on December 24, 1992.
FUND FOR TOMORROW
AVERAGE ANNUAL TOTAL RETURN
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS D SHARES
------------------------ ------------------------ ------------------------ -----------------------
WITHOUT WITHOUT WITHOUT WITHOUT
SALES WITH SALES SALES WITH SALES SALES WITH SALES SALES WITH SALES
PERIOD CHARGE(%) CHARGE*(%) CHARGE(%) CHARGE*(%) CHARGE(%) CHARGE*(%) CHARGE(%) CHARGE*(%)
- ---------------------------- ----------- ------------ ----------- ------------ ----------- ------------ ----------- -----------
5 months ended
6/30/98+ .................. 13.07 7.13 12.66 8.66 12.58 11.58 13.02 7.08
Year Ended
1/31/98 ................... 12.43 6.53 11.20 7.58 11.15 10.24 12.07 6.19
Five Years Ended
1/31/98 ................... 12.82 11.61 11.63 11.63 N/A N/A N/A N/A
Ten years or inception**
through 1/31/98 ........... 12.67 12.02 12.45 12.45 16.50 16.50 17.61 15.70
- ---------
* Assumes the maximum applicable sales charge. The maximum initial sales charge
on Class A and Class D shares is 5.25%. The maximum CDSC on Class B shares
is 4.0% and is reduced to 0% after four years. Class C shares are subject
to a 1.0% CDSC for one year.
** Class A shares commenced operations on October 26, 1988. Performance of
Class B shares is for the ten year period ended January 31, 1998. Class C
and Class D shares commenced operations on October 21, 1994.
+ Aggregate total returns.
SHAREHOLDER RIGHTS
Stockholders of Fundamental Growth Fund are entitled to one vote for each
share held and fractional votes for fractional shares held and will vote on the
election of Directors and any other matter submitted to a stockholder vote.
Fundamental Growth Fund does not intend to hold meetings of stockholders in any
year in which the Investment Company Act does not require stockholders to act
upon any of the following matters: (i) election of Directors; (ii) approval of
an investment advisory agreement; (iii) approval of distribution arrangements;
and (iv) ratification of selection of independent accountants. Voting rights
for Directors are not cumulative. Shares of Fundamental Growth Fund to be
issued to Fund For Tomorrow stockholders in the Reorganization will be fully
paid and non-assessable, will have no preemptive rights, and will have the
conversion rights described in this Prospectus and Proxy Statement and in the
Fundamental Growth Fund Prospectus. Each share of Fundamental Growth Fund
common stock is entitled to participate equally in dividends and distributions
20
declared by the Fund and in the net assets of the Fund on liquidation or
dissolution after satisfaction of outstanding liabilities, except that Class B,
Class C and Class D shares bear certain additional expenses. Rights
attributable to shares of Fund For Tomorrow are identical to those described
above.
DIVIDENDS AND DISTRIBUTIONS
The current policy of Fund For Tomorrow with respect to dividends and
distributions is substantially the same as the policy of Fundamental Growth
Fund. It is each Fund's intention to distribute all of its net investment
income, if any. In addition, each Fund distributes all net realized capital
gains, if any, to stockholders at least annually.
TAX INFORMATION
The tax consequences associated with investment in shares of Fund For
Tomorrow are substantially the same as the tax consequences associated with
investment in shares of Fundamental Growth Fund. See "Additional Information --
Taxes" in the Fundamental Growth Fund Prospectus.
PORTFOLIO TRANSACTIONS
The procedures for engaging in portfolio transactions are generally the
same for both Fund For Tomorrow and Fundamental Growth Fund. For a discussion
of these procedures, see "Investment Objective and Policies -- Other Investment
Policies and Practices" in the Fundamental Growth Fund Prospectus and
"Portfolio Transactions and Brokerage" in the Fundamental Growth Fund
Statement.
Each Fund may effect portfolio transactions on foreign securities
exchanges and may incur settlement delays on certain of such exchanges. In
addition, costs associated with transactions in foreign securities are
generally higher than such costs associated with transactions in U.S.
securities.
PORTFOLIO TURNOVER
Generally, neither Fund For Tomorrow nor Fundamental Growth Fund purchases
securities for short-term trading profits. However, either Fund may dispose of
securities without regard to the time that they have been held when such
action, for defensive or other reasons, appears advisable to MLAM. Neither Fund
has any limit on its rate of portfolio turnover. The portfolio turnover rates
for Fund For Tomorrow for its fiscal years ended January 31, 1998 and 1997 were
17.63% and 39.96%, respectively. The portfolio turnover rates for Fundamental
Growth Fund for its fiscal years ended August 31, 1997 and 1996 were 94.38% and
82.10%, respectively. Higher portfolio turnover may contribute to higher
transactional costs and negative tax consequences, such as an increase in
capital gain dividends or in ordinary income dividends of accrued market
discount.
ADDITIONAL INFORMATION
NET ASSET VALUE. Both Fund For Tomorrow and Fundamental Growth Fund
determine the net asset value of each class of its shares once daily 15 minutes
after the close of business on the NYSE (generally, 4:00 p.m. New York time),
on each day during which the NYSE is open for trading. Net asset value is
computed by dividing the value of the securities held by the Fund plus any cash
or other assets (including interest and dividends accrued but not yet received)
minus all liabilities (including accrued expenses) by the total number of
shares outstanding at such time.
STOCKHOLDER SERVICES. Fundamental Growth Fund offers a number of
stockholder services and investment plans designed to facilitate investment in
shares of the Fund. In addition, U.S. stockholders of each class of shares of
Fundamental Growth Fund have an exchange privilege with certain other
MLAM-advised mutual funds. Stockholder services, including exchange privileges,
available to stockholders of Fund For Tomorrow and Fundamental Growth Fund are
virtually identical. For a description of these services, see "Shareholder
Services" in the Fundamental Growth Fund Prospectus.
INDEPENDENT AUDITORS. Currently Ernst & Young LLP serves as the
independent auditors of Fundamental Growth Fund and Deloitte & Touche LLP
serves as the independent auditors of Fund For Tomorrow. If the Reorganization
is approved, it is anticipated that Ernst & Young LLP will serve as the
independent auditors of the Combined Fund. See "Experts."
CUSTODIAN. The Chase Manhattan Bank, Global Securities Services ("Chase
Manhattan") acts as custodian of the cash and securities of Fundamental Growth
Fund. The principal business address of Chase Manhattan is Chase MetroTech
Center, 18th Floor, Brooklyn, New York 11245. The Bank of New York ("BONY")
acts as custodian for Fund For Tomorrow.
21
BONY's principal business address is 90 Washington Street, 12th Floor, New
York, New York 10286. It is presently anticipated that Chase Manhattan will
serve as the custodian of the Combined Fund.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND SHAREHOLDER SERVICING AGENT.
Financial Data Services, Inc., 4800 Deer Lake Drive East, Jacksonville, Florida
32246-6484, serves as the transfer agent, dividend disbursing agent and
shareholder servicing agent with respect to each Fund (the "Transfer Agent"),
at the same fee schedule, pursuant to separate transfer agency, dividend
disbursing agency and shareholder servicing agency agreements with each of the
Funds.
CAPITAL STOCK. Fund For Tomorrow has an authorized capital of 400,000,000
shares of common stock, par value $0.10 per share, divided into four classes,
designated Class A, Class B, Class C and Class D common stock, each of which
consists of 100,000,000 shares. Fundamental Growth Fund has an authorized
capital of 400,000,000 shares of common stock, par value $0.10 per share,
divided into four classes, also designated Class A, Class B, Class C and Class
D common stock, each of which consists of 100,000,000 shares. The rights,
preferences and expenses attributable to the Class A, Class B, Class C and
Class D shares of Fund For Tomorrow are identical in all respects to those of
the Class A, Class B, Class C and Class D shares of Fundamental Growth Fund.
STOCKHOLDER INQUIRIES. Stockholder inquiries with respect to Fund For
Tomorrow and Fundamental Growth Fund may be addressed to either Fund by
telephone at (609) 282-2800 or at the address set forth on the cover page of
this Proxy Statement and Prospectus.
THE REORGANIZATION
GENERAL
Under the Agreement and Plan of Reorganization (attached hereto as Exhibit
I), Fundamental Growth Fund will acquire substantially all of the assets, and
will assume substantially all of the liabilities, of Fund For Tomorrow, in
exchange solely for an equal aggregate value of shares to be issued by
Fundamental Growth Fund. Upon receipt by Fund For Tomorrow of such shares, Fund
For Tomorrow will distribute the shares to the holders of shares of Fund For
Tomorrow, as described below.
Generally, the assets transferred by Fund For Tomorrow to Fundamental
Growth Fund will include all investments of Fund For Tomorrow held in its
portfolio as of the Valuation Time (as defined in the Agreement and Plan of
Reorganization) and all other assets of Fund For Tomorrow as of such time.
Fund For Tomorrow will distribute the shares of Fundamental Growth Fund
received by it pro rata to its stockholders in exchange for such stockholders'
proportional interests in Fund For Tomorrow. The shares of Fundamental Growth
Fund received by Fund For Tomorrow stockholders will be of the same class and
have the same aggregate net asset value as each such stockholder's interest in
Fund For Tomorrow as of the Valuation Time (previously defined as the
"Corresponding Shares"). (See, "The Agreement and Plan of Reorganization --
Valuation of Assets and Liabilities" for information concerning the calculation
of net asset value.) The distribution will be accomplished by opening new
accounts on the books of Fundamental Growth Fund in the names of all
stockholders of Fund For Tomorrow, including stockholders holding Fund For
Tomorrow shares in certificate form, and transferring to each stockholder's
account the Corresponding Shares of Fundamental Growth Fund representing such
stockholder's interest previously credited to the account of Fund For Tomorrow.
Stockholders holding Fund For Tomorrow shares in certificate form may receive
certificates representing the Corresponding Shares of Fundamental Growth Fund
credited to their account in respect of such Fund For Tomorrow shares by
sending the certificates to the Transfer Agent accompanied by a written request
for such exchange.
Since the Corresponding Shares of Fundamental Growth Fund would be issued
at net asset value in exchange for the net assets of Fund For Tomorrow having a
value equal to the aggregate net asset value of those shares of Fund For
Tomorrow, the net asset value per share of Fundamental Growth Fund should
remain virtually unchanged solely as a result of the Reorganization. Thus, the
Reorganization should not result in dilution of net asset value of Fundamental
Growth Fund immediately following consummation of the Reorganization. However,
as a result of the Reorganization, a stockholder of Fund For Tomorrow would
hold a smaller percentage of ownership in Fundamental Growth Fund than he or
she did in Fund For Tomorrow prior to the Reorganization.
22
PROCEDURE
On July 27, 1998, the Board of Directors of Fund For Tomorrow, including
all of the Directors who are not "interested persons,"as defined by the
Investment Company Act, approved the Agreement and Plan of Reorganization and
the submission of such Agreement and Plan to Fund For Tomorrow stockholders for
approval. The Board of Directors of Fundamental Growth Fund, including all of
the Directors who are not interested persons, also approved the Agreement and
Plan of Reorganization on July 8, 1998.
If the stockholders of Fund For Tomorrow approve the Reorganization at the
Meeting, all required regulatory approvals are obtained, and certain conditions
are either met or waived, the Reorganization will take place during the fourth
calendar quarter of 1998.
THE BOARD OF DIRECTORS OF FUND FOR TOMORROW RECOMMENDS THAT FUND FOR
TOMORROW STOCKHOLDERS APPROVE THE AGREEMENT AND PLAN OF REORGANIZATION.
TERMS OF THE AGREEMENT AND PLAN OF REORGANIZATION
THE FOLLOWING IS A SUMMARY OF THE SIGNIFICANT TERMS OF THE AGREEMENT AND
PLAN OF REORGANIZATION. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO THE AGREEMENT AND PLAN OF REORGANIZATION, ATTACHED HERETO AS EXHIBIT I.
VALUATION OF ASSETS AND LIABILITIES. The respective assets of Fund For
Tomorrow and Fundamental Growth Fund will be valued as of the Valuation Time.
The assets in each Fund will be valued according to the procedures set forth
under "Additional Information -- Determination of Net Asset Value" in the
Fundamental Growth Fund Prospectus. Purchase orders for Fund For Tomorrow
shares which have not been confirmed as of the Valuation Time will be treated
as assets of Fund For Tomorrow for purposes of the Reorganization; redemption
requests with respect to Fund For Tomorrow shares which have not settled as of
the Valuation Time will be treated as liabilities of Fund For Tomorrow for
purposes of the Reorganization.
DISTRIBUTION OF FUNDAMENTAL GROWTH FUND SHARES. On the next full business
day following the Valuation Time (the "Exchange Date"), Fundamental Growth Fund
will issue to Fund For Tomorrow a number of shares the aggregate net asset
value of which will equal the aggregate net asset value of shares of Fund For
Tomorrow as of the Valuation Time. Each holder of Fund For Tomorrow shares will
receive, in exchange for his or her proportionate interest in Fund For
Tomorrow, Corresponding Shares of Fundamental Growth Fund of the same class and
having the same aggregate net asset value as the Fund For Tomorrow shares held
by such stockholder as of the Valuation Time.
EXPENSES. The expenses of the Reorganization that are directly
attributable to each Fund and the conduct of its business will be deducted from
the assets of that Fund as of the Valuation Time. These expenses are expected
to include the expenses incurred in preparing materials to be distributed to
each Fund's board, legal fees incurred in preparing each Fund's board
materials, attending each Fund's board meetings and preparing the minutes, and
accounting fees associated with each Fund's financial statements. The expenses
of the Reorganization that are attributable to the transaction itself,
including expenses in connection with obtaining the IRS private letter ruling,
will be borne pro rata by each Fund according to its net assets as of the
Valuation Time. These expenses are expected to include expenses incurred in
connection with the preparation of the Agreement and Plan of Reorganization and
the Registration Statement on Form N-14 (including the Prospectus and Proxy
Statement), Commission and other filing fees and legal and audit fees in
connection with the Reorganization.
REQUIRED APPROVALS. Under Fund For Tomorrow's Articles of Incorporation
(as amended to date) and relevant Maryland law, stockholder approval of the
Agreement and Plan of Reorganization requires the affirmative vote of Fund For
Tomorrow stockholders representing a majority of the total number of votes
entitled to be cast thereon.
DEREGISTRATION AND DISSOLUTION. Following the transfer of the assets and
liabilities of Fund For Tomorrow to Fundamental Growth Fund and the
distribution of Corresponding Shares of Fundamental Growth Fund to Fund For
Tomorrow stockholders, Fund For Tomorrow will terminate its registration under
the Investment Company Act and its incorporation under Maryland law and will
withdraw its authority to do business in any state where it is required to do
so.
AMENDMENTS AND CONDITIONS. The Agreement and Plan of Reorganization may be
amended at any time prior to the Exchange Date with respect to any of the terms
therein. The obligations of Fund For Tomorrow and Fundamental Growth Fund
pursuant to the Agreement and Plan of Reorganization are subject to various
conditions, including a registration statement on Form N-14 being declared
effective by the Commission, approval of the Reorganization by Fund For
Tomorrow stockholders, a favorable IRS private letter ruling or an opinion of
counsel being received as to tax matters, an opinion of counsel being received
as to securities matters and the continuing accuracy of various representations
and warranties of Fund For Tomorrow and Fundamental Growth Fund being confirmed
by the respective parties.
23
TERMINATION, POSTPONEMENT AND WAIVERS. The Agreement and Plan of
Reorganization may be terminated, and the Reorganization abandoned at any time,
whether before or after adoption thereof by the Fund For Tomorrow stockholders,
prior to the Exchange Date or the Exchange Date may be postponed: (i) by mutual
consent of the Boards of Directors of Fund For Tomorrow and Fundamental Growth
Fund; (ii) by the Board of Directors of Fund For Tomorrow if any condition to
Fund For Tomorrow's obligations has not been fulfilled or waived by such Board;
or (iii) by the Board of Directors of Fundamental Growth Fund if any condition
to Fundamental Growth Fund's obligations has not been fulfilled or waived by
such Board.
POTENTIAL BENEFITS TO STOCKHOLDERS AS A RESULT OF THE REORGANIZATION
MLAM and the Board of Directors of Fund For Tomorrow have identified
certain potential benefits to stockholders that are likely to result from the
Reorganization. First, following the Reorganization, Fund For Tomorrow
stockholders will remain invested in a diversified open-end fund that has an
investment objective of long-term capital growth. In addition, Fund For
Tomorrow stockholders are likely to experience certain additional benefits,
including lower expenses per share and potential economies of scale.
Specifically, as described above under "Comparison of the Funds --
Management -- Management and Advisory Fees," after the Reorganization, on a pro
forma basis, Fundamental Growth Fund will pay an advisory fee to MLAM at the
same annual rate as currently paid by Fund For Tomorrow and the total operating
expenses of Fundamental Growth Fund after the Reorganization, as a percent of
net assets, would be less than the current operating expenses for Fund For
Tomorrow. See "Summary -- Pro Forma Fee Tables." In addition, certain fixed
costs, such as costs of printing stockholder reports and proxy statements,
legal expenses, audit fees, registration fees, mailing costs and other expenses
would be spread across a larger asset base, thereby lowering the expense ratio
borne by Fund For Tomorrow stockholders. To illustrate the potential economies
of scale for Fund For Tomorrow, on June 30, 1998, the total operating expense
ratio for Fund For Tomorrow Class A shares was 0.93% (based on total fund net
assets of approximately $312 million) and the total operating expense ratio for
Fundamental Growth Fund Class A shares was 0.83% (based on total fund net
assets of approximately $1,062 million). If the Reorganization had taken place
on that date, the total operating expense ratio for Fundamental Growth Fund
Class A shares on a pro forma basis would have been 0.82% (based on total fund
net assets of approximately $1.4 billion).
The following table sets forth the net assets of Fund For Tomorrow and the
net assets of Fundamental Growth Fund as of the dates indicated.
FUNDAMENTAL GROWTH FUND FUND FOR TOMORROW
- ----------------------------------- -------------------------------
DATE NET ASSETS DATE NET ASSETS
- ----------------- ----------------- --------------- ---------------
As of 8/31/96 $ 240,632,901 As of 1/31/96 $380,762,715
As of 8/31/97 $ 406,518,289 As of 1/31/97 $391,122,847
As of 2/28/98 $ 677,236,436 As of 1/31/98 $308,818,599
As of 6/30/98 $1,061,566,810 As of 6/30/98 $311,611,903
The table illustrates that the net assets of Fundamental Growth Fund,
which commenced operations on December 12, 1992, have experienced substantial
increases over the past several years, while the net assets of Fund For
Tomorrow, which commenced operations on March 5, 1984, have generally
decreased. Were these trends to continue, MLAM anticipates that Fundamental
Growth Fund may experience increasing economies of scale which, as a result,
may have the effect of reducing its overall operating expense ratio, while Fund
For Tomorrow may experience the opposite result, that is, a higher operating
expense ratio due to a continuing reduction in assets. Although there can be no
assurance that the foregoing would in fact occur, MLAM believes that the
economies of scale that may be realized as a result of the Reorganization would
be beneficial to Fund For Tomorrow shareholders.
Based on the foregoing, the Board of Directors of Fund For Tomorrow
concluded that the Reorganization presents no significant risks or costs
(including legal, accounting and administrative costs) that would outweigh the
benefits discussed above.
In approving the Reorganization, the Board of Directors of both Funds
determined that the interests of existing stockholders of both Funds would not
be diluted as a result of the Reorganization.
TAX CONSEQUENCES OF THE REORGANIZATION
GENERAL. The Reorganization has been structured with the intention that it
qualify for Federal income tax purposes as a tax-free reorganization under
Section 368(a)(1)(C) of the Code. Fund For Tomorrow and Fundamental Growth Fund
have
24
elected and qualified for the special tax treatment afforded "regulated
investment companies" under the Code, and Fundamental Growth Fund intends to
continue to so qualify after the Reorganization. Fund For Tomorrow and
Fundamental Growth Fund have jointly requested a private letter ruling from the
IRS to the effect that for Federal income tax purposes: (i) the Reorganization,
as described, will constitute a reorganization within the meaning of Section
368(a)(1)(C) of the Code and Fund For Tomorrow and Fundamental Growth Fund will
each be deemed a "party" to the Reorganization within the meaning of Section
368(b); (ii) in accordance with Section 354(a)(1) of the Code, no gain or loss
will be recognized by the stockholders of Fund For Tomorrow upon the receipt of
Corresponding Shares of Fundamental Growth Fund in the Reorganization solely in
exchange for their shares of Fund For Tomorrow; (iii) in accordance with
Section 358 of the Code, immediately after the Reorganization, the tax basis of
the Corresponding Shares of Fundamental Growth Fund received by the
stockholders of Fund For Tomorrow in the Reorganization will be equal, in the
aggregate, to the tax basis of the shares of Fund For Tomorrow surrendered in
exchange; (iv) in accordance with Section 1223 of the Code, the holding period
of the Corresponding Shares of Fundamental Growth Fund received by stockholders
of Fund For Tomorrow in the Reorganization will include the holding period of
the shares of Fund For Tomorrow immediately prior to the Reorganization
(provided that at the time of the Reorganization the shares of Fund For
Tomorrow were held as capital assets); (v) in accordance with Section 361(a) of
the Code, no gain or loss will be recognized by Fund For Tomorrow on the asset
transfer solely in exchange for Fundamental Growth Fund shares or on the
distribution of Fundamental Growth Fund shares to Fund For Tomorrow
stockholders under Section 361(c)(1); (vi) under Section 1032 of the Code, no
gain or loss will be recognized by Fundamental Growth Fund on the exchange of
its shares for Fund For Tomorrow assets; (vii) in accordance with Section
362(b) of the Code, the tax basis of the assets of Fund For Tomorrow in the
hands of Fundamental Growth Fund will be the same as the tax basis of such
assets in the hands of Fund For Tomorrow immediately prior to the
Reorganization; (viii) in accordance with Section 1223 of the Code, the
holding period of the transferred assets in the hands of Fundamental Growth
Fund will include the holding period of such assets in the hands of Fund For
Tomorrow; and (ix) the taxable year of Fund For Tomorrow will end on the
effective date of the Reorganization and pursuant to Section 381(a) of the Code
and regulations thereunder, Fundamental Growth Fund will succeed to and take
into account certain tax attributes of Fund For Tomorrow, such as earnings and
profits, capital loss carryovers and method of accounting. If the IRS does not
issue a favorable private letter ruling in advance of the selected closing
date, the Funds may proceed with the closing of the Reorganization upon receipt
of an opinion of counsel regarding the tax matters covered by the ruling
request.
To the extent Fundamental Growth Fund has unrealized capital gains at the
time of the Reorganization, Fund For Tomorrow stockholders may incur taxable
gains in the year that Fundamental Growth Fund realizes and distributes those
gains. This will be true notwithstanding that the unrealized gains were
reflected in the price of Fundamental Growth Fund shares at the time they were
exchanged for assets of Fund For Tomorrow in the Reorganization. Conversely,
stockholders of Fundamental Growth Fund will share in unrealized capital gains
of Fund For Tomorrow after the Reorganization and bear a tax consequence on the
subsequent realization of such gains. Stockholders should consult their tax
advisers regarding the effect of the Reorganization in light of their individual
circumstances. As the foregoing relates only to Federal income tax consequences,
stockholders also should consult their tax advisers as to the foreign, state and
local tax consequences of the Reorganization.
STATUS AS A REGULATED INVESTMENT COMPANY. Both Fund For Tomorrow and
Fundamental Growth Fund have elected and qualified to be taxed as regulated
investment companies under Sections 851-855 of the Code, and after the
Reorganization, Fundamental Growth Fund intends to continue to operate so as to
qualify as a regulated investment company. Following the liquidation and
dissolution of Fund For Tomorrow and distribution of shares of Fundamental
Growth Fund to Fund For Tomorrow stockholders, Fund For Tomorrow will terminate
its registration under the Investment Company Act and its incorporation under
Maryland law.
CAPITALIZATION
The following table sets forth as of June 30, 1998: (i) the capitalization
of Fund For Tomorrow, (ii) the capitalization of Fundamental Growth Fund and
(iii) the pro forma capitalization of the Combined Fund as adjusted to give
effect to the Reorganization.
25
PRO FORMA CAPITALIZATION OF FUNDAMENTAL GROWTH FUND, FUND FOR TOMORROW AND
COMBINED FUND AS OF JUNE 30, 1998 (UNAUDITED)
FUNDAMENTAL GROWTH FUND
-----------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS D
----------------- ----------------- ----------------- -----------------
Total Net Assets: $172,885,564 $604,496,007 $135,909,704 $148,275,535
Shares Outstanding: 8,970,935 32,949,565 7,375,265 7,755,139
Net Asset Value Per Share: $ 19.27 $ 18.35 $ 18.43 $ 19.12
FUND FOR TOMORROW
--------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS D
----------------- ----------------- ----------------- -----------------
Total Net Assets: $ 10,819,194 $ 49,899,908 $ 1,780,876 $249,111,925
Shares Outstanding: 612,910 2,951,579 105,848 14,201,953
Net Asset Value Per Share: $ 17.65 $ 16.91 $ 16.82 $ 17.54
COMBINED FUND
--------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS D
----------------- ----------------- ----------------- -----------------
Total Net Assets*: $176,638,105 $628,912,918 $132,566,708 $375,940,282
Shares Outstanding: 9,516,432 35,592,421 7,469,168 20,415,072
Net Asset Value Per Share*: $ 18.56 $ 17.67 $ 17.75 $ 18.41
- ---------
* Total Net Assets and Net Asset Value Per Share include the aggregate value of
Fund For Tomorrow's net assets which would have been transferred to
Fundamental Growth Fund had the Reorganization been consummated on June 30,
1998. Assumes distribution of undistributed net investment income and
undistributed realized capital gains, and accrual of estimated Reorganization
expenses of $350,000. No assurance can be given as to how many shares of
Fundamental Growth Fund the Fund For Tomorrow stockholders will receive on the
date the Reorganization takes place, and the foregoing should not be relied
upon to reflect the number of shares of Fundamental Growth Fund that actually
will be received on or after such date.
INFORMATION CONCERNING THE SPECIAL MEETING
DATE, TIME AND PLACE OF MEETING
The Meeting will be held on October 13, 1998, at the offices of Merrill
Lynch Asset Management, L.P., 800 Scudders Mill Road, Plainsboro, New Jersey at
9:00 a.m., New York time.
SOLICITATION, REVOCATION AND USE OF PROXIES
A stockholder executing and returning a proxy has the power to revoke it
at any time prior to its exercise by executing a superseding proxy or by
submitting a notice of revocation to the Secretary of Fund For Tomorrow.
Although mere attendance at the Meeting will not revoke a proxy, a stockholder
present at the Meeting may withdraw his or her proxy and vote in person.
All shares represented by properly executed proxies, unless such proxies
previously have been revoked, will be voted at the Meeting in accordance with
the directions on the proxies; if no direction is indicated on a properly
executed proxy, such shares will be voted "FOR" approval of the Agreement and
Plan of Reorganization.
It is not anticipated that any matters other than the adoption of the
Agreement and Plan of Reorganization will be brought before the Meeting. If,
however, any other business properly is brought before the Meeting, proxies
will be voted in accordance with the judgment of the persons designated on such
proxies.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record of shares of Fund For Tomorrow at the close of
business on August 25, 1998 (the "Record Date") are entitled to vote at the
Meeting or any adjournment thereof. At the close of business on the Record
Date, there were 17,595,753.43 shares of Fund For Tomorrow common stock issued
and outstanding and entitled to vote.
26
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF FUND FOR
TOMORROW AND FUNDAMENTAL GROWTH FUND
To the knowledge of Fund For Tomorrow, as of the Record Date, no person or
entity owned beneficially or of record 5% or more of any class of shares of
Fund For Tomorrow or of all classes of Fund For Tomorrow shares in the
aggregate.
At the Record Date, the Directors and officers of Fund For Tomorrow as a
group (12 persons) owned an aggregate of less than 1% of the outstanding shares
of Fund For Tomorrow and owned an aggregate of less than 1% of the outstanding
shares of common stock of ML & Co.
To the knowledge of Fundamental Growth Fund, as of the Record Date, no
person or entity owned beneficially or of record 5% or more of any class of
shares of Fundamental Growth Fund or of all classes of Fundamental Growth Fund
shares in the aggregate.
As of the Record Date, the Directors and officers of Fundamental Growth
Fund as a group (12 persons) owned an aggregate of less than 1% of the
outstanding shares of Fundamental Growth Fund and owned less than 1% of the
outstanding shares of common stock of ML & Co.
VOTING RIGHTS AND REQUIRED VOTE
For purposes of this Proxy Statement and Prospectus, each share of each
class of Fund For Tomorrow is entitled to one vote. Approval of the Agreement
and Plan of Reorganization requires the affirmative vote of Fund For Tomorrow
stockholders representing a majority of the total votes entitled to be cast
thereon, with all shares voting as a single class.
Under Maryland law, stockholders of a registered open-end investment
company such as Fund For Tomorrow are not entitled to demand the fair value of
their shares upon a transfer of assets and will be bound by the terms of the
Reorganization if approved at the Meeting. However, any stockholder of Fund For
Tomorrow may redeem his or her Fund For Tomorrow shares prior to the
Reorganization.
A quorum for purposes of the Meeting consists of a majority of the shares
entitled to vote at the Meeting, present in person or by proxy. If, by the time
scheduled for the Meeting, a quorum of Fund For Tomorrow's stockholders is not
present or if a quorum is present but sufficient votes in favor of the
Agreement and Plan of Reorganization are not received from the stockholders of
Fund For Tomorrow, the persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of proxies from
stockholders. Any such adjournment will require the affirmative vote of a
majority of the shares of Fund For Tomorrow present in person or by proxy and
entitled to vote at the session of the Meeting to be adjourned. The persons
named as proxies will vote in favor of any such adjournment if they determine
that adjournment and additional solicitation are reasonable and in the
interests of the stockholders of Fund For Tomorrow.
ADDITIONAL INFORMATION
The expenses of preparation, printing and mailing of the enclosed form of
proxy, the accompanying Notice and this Proxy Statement and Prospectus will be
borne by Fundamental Growth Fund and Fund For Tomorrow pro rata according to
the aggregate net assets of each Fund's portfolio on the date of
Reorganization. Such expenses are currently estimated to be $350,000.
Fund For Tomorrow will reimburse banks, brokers and others for their
reasonable expenses in forwarding proxy solicitation materials to the
beneficial owners of shares of Fund For Tomorrow and will reimburse certain
persons that Fund For Tomorrow may employ for their reasonable expenses in
assisting in the solicitation of proxies from such beneficial owners of shares
of Fund For Tomorrow.
In order to obtain the necessary quorum at the Meeting, supplementary
solicitation may be made by mail, telephone, telegraph or personal interview by
officers of Fund For Tomorrow. Fund For Tomorrow has retained Shareholder
Communications Corporation, 17 State Street, 27th Floor, New York, New York
10004, to aid in the solicitation of proxies at a cost to be borne by Fund For
Tomorrow estimated not to exceed $15,000, plus out-of-pocket expenses.
Broker-dealer firms, including Merrill Lynch, holding shares of Fund For
Tomorrow in "street name" for the benefit of their customers and clients will
request the instructions of such customers and clients on how to vote their
shares before the Meeting. Broker-dealer firms, including Merrill Lynch, will
not be permitted to grant voting authority without instructions with respect to
the approval of the Agreement and Plan of Reorganization. Fund For Tomorrow
will include shares held of record by broker-dealers as to which such authority
has been granted in its tabulation of the total number of shares present
27
for purposes of determining whether the necessary quorum of stockholders
exists. Properly executed proxies that are returned but that are marked
"abstain" or with respect to which a broker-dealer has declined to vote on any
proposal ("broker non-votes") will be counted as present for the purposes of
determining a quorum. Since approval of the Agreement and Plan of
Reorganization requires the affirmative vote of stockholders representing a
majority of the outstanding shares of Fund For Tomorrow, abstentions and broker
non-votes will have the same effect as a vote against approval of the Agreement
and Plan of Reorganization.
This Proxy Statement and Prospectus does not contain all of the
information set forth in the registration statements and the exhibits relating
thereto which Fund For Tomorrow and Fundamental Growth Fund, respectively, have
filed with the Commission under the Securities Act and the Investment Company
Act, to which reference is hereby made.
Fund For Tomorrow and Fundamental Growth Fund both file reports and other
information with the Commission. Reports, proxy statements, registration
statements and other information filed by Fund For Tomorrow and Fundamental
Growth Fund can be inspected and copied at the public reference facilities of
the Commission in Washington, D.C. and at the New York Regional Office of the
Commission at Seven World Trade Center, New York, New York 10048. Copies of
such materials also can be obtained by mail from the Public Reference Branch,
Office of Consumer Affairs and Information Services, Securities and Exchange
Commission, Washington, D.C. 20549, at prescribed rates. The Commission
maintains a web site (http://www.sec.gov) that contains the Statement of
Additional Information, the Fundamental Growth Fund Prospectus, the Fund For
Tomorrow Prospectus, the Fundamental Growth Fund Statement, the Fund For
Tomorrow Statement, other material incorporated by reference and other
information regarding the Funds.
LEGAL PROCEEDINGS
There are no material legal proceedings to which Fund For Tomorrow or
Fundamental Growth Fund is a party.
LEGAL OPINIONS
Certain legal matters in connection with the Reorganization will be passed
upon for Fund For Tomorrow by Swidler Berlin Shereff Friedman, LLP, 919 Third
Avenue, New York, New York and for Fundamental Growth Fund by Brown & Wood LLP,
One World Trade Center, New York, New York. Swidler Berlin Shereff Friedman,
LLP will rely as to matters of Maryland law on the opinion of Brown & Wood LLP,
815 Connecticut Avenue, N.W., Washington, D.C. 20006-4004.
EXPERTS
The financial highlights of Fund For Tomorrow included in this Proxy
Statement and Prospectus have been so included in reliance on the report of
Deloitte & Touche LLP, independent auditors, given on their authority as
experts in auditing and accounting. The principal business address of Deloitte
& Touche LLP is 117 Campus Drive, Princeton, New Jersey 08540.
The statement of assets and liabilities of Fundamental Growth Fund,
including the schedule of investments, as of August 31, 1997 and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended incorporated by
reference in this Proxy Statement and Prospectus and financial highlights for
each of the periods from inception to August 31, 1997, included and
incorporated by reference in this Proxy Statement and Prospectus have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon incorporated herein by reference, and are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing. The principal business address of Ernst & Young LLP is 202 Carnegie
Center, Princeton, New Jersey 08543.
STOCKHOLDER PROPOSALS
A stockholder proposal intended to be presented at any subsequent meeting
of stockholders of Fund For Tomorrow must be received by Fund For Tomorrow in a
reasonable time before the Board of Directors solicitation relating to such
meeting is to be made in order to be considered in Fund For Tomorrow's proxy
statement and form of proxy relating to the meeting.
By Order of the Board of Directors,
SUSAN B. BAKER
SECRETARY, MERRILL LYNCH FUND FOR
TOMORROW, INC.
28
EXHIBIT I
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of
the 4th day of September, 1998, by and between MERRILL LYNCH FUND FOR TOMORROW,
INC., a Maryland corporation ("FFT"), and MERRILL LYNCH FUNDAMENTAL GROWTH
FUND, INC., a Maryland corporation ("Fundamental Growth").
PLAN OF REORGANIZATION
The reorganization will consist of the acquisition by Fundamental Growth
of substantially all of the assets, and the assumption of substantially all of
the liabilities, of FFT in exchange solely for an equal aggregate value of
newly issued shares of Fundamental Growth's common stock, with a par value of
$.10 per share, and the subsequent distribution of Corresponding Shares
(defined below) of Fundamental Growth to FFT shareholders in exchange for their
shares of common stock of FFT, with a par value of $.10 per share, in
liquidation of FFT, all upon and subject to the terms hereinafter set forth
(the "Reorganization").
In the course of the Reorganization, shares of Fundamental Growth will be
distributed to FFT shareholders as follows: each holder of FFT shares will be
entitled to receive that class of shares of Fundamental Growth having the same
letter designation (I.E., Class A, Class B, Class C or Class D), and the same
distribution fees, account maintenance fees and sales charges (including
contingent deferred sales charges), if any ("Corresponding Shares"), as the
shares of FFT owned by such shareholder on the Exchange Date (as defined in
Section 7 of this Agreement). The aggregate net asset value of the
Corresponding Shares of Fundamental Growth to be received by each shareholder
of FFT will equal the aggregate net asset value of the FFT shares owned by such
shareholder on the Exchange Date. In consideration therefor, on the Exchange
Date, Fundamental Growth shall acquire substantially all of the assets of FFT
and assume substantially all of FFT's obligations and liabilities then
existing, whether absolute, accrued, contingent or otherwise. It is intended
that the Reorganization described in this Plan shall be a reorganization within
the meaning of Section 368(a)(1)(C) of the Internal Revenue Code of 1986, as
amended (the "Code"), and any successor provision.
As promptly as practicable after the liquidation of FFT pursuant to the
Reorganization, FFT shall be dissolved in accordance with the laws of the State
of Maryland and will terminate its registration under the Investment Company
Act of 1940, as amended (the "1940 Act").
AGREEMENT
In order to consummate the Reorganization and in consideration of the
premises and the covenants and agreements hereinafter set forth, and intending
to be legally bound, FFT and Fundamental Growth hereby agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF FFT.
FFT represents and warrants to, and agrees with, Fundamental Growth that:
(a) FFT is a corporation duly organized, validly existing and in good
standing in conformity with the laws of the State of Maryland, and has the
power to own all of its assets and to carry out this Agreement. FFT has all
necessary Federal, state and local authorizations to carry on its business as
it is now being conducted and to carry out this Agreement.
(b) FFT is duly registered under the 1940 Act as a diversified, open-end
management investment company (File No. 811-3871), and such registration has
not been revoked or rescinded and is in full force and effect. FFT has elected
and qualified for the special tax treatment afforded regulated investment
companies ("RICs") under Sections 851-855 of the Code at all times since its
inception and intends to continue to so qualify for its taxable year ending
upon the liquidation of FFT.
(c) As used in this Agreement, the term "Investments" shall mean (i) the
investments of FFT shown on the schedule of its investments as of the Valuation
Time (as defined in Section 3(c) of this Agreement) furnished to Fundamental
Growth, with such additions thereto and deletions therefrom as may have arisen
in the course of FFT's business up to the Valuation Time; and (ii) all other
assets owned by FFT or liabilities incurred as of the Valuation Time.
(d) FFT has full power and authority to enter into and perform its
obligations under this Agreement. The execution, delivery and performance of
this Agreement has been duly authorized by all necessary action of its Board of
Directors, and,
I-1
subject to receipt of shareholder approval, this Agreement constitutes a valid
and binding contract enforceable in accordance with its terms, subject to the
effects of bankruptcy, insolvency, moratorium, fraudulent conveyance and
similar laws relating to or affecting creditors' rights generally and court
decisions with respect thereto.
(e) Fundamental Growth has been furnished with a statement of assets and
liabilities and a schedule of investments of FFT, each as of January 31, 1998,
said financial statements having been examined by Deloitte & Touche LLP,
independent public accountants. An unaudited statement of assets and
liabilities of FFT and an unaudited schedule of investments of FFT, each as of
the Valuation Time, will be furnished to Fundamental Growth at or prior to the
Exchange Date for the purpose of determining the number of shares of
Fundamental Growth to be issued pursuant to Section 4 of this Agreement; and
each will fairly present the financial position of FFT as of the Valuation Time
in conformity with generally accepted accounting principles applied on a
consistent basis.
(f) Fundamental Growth will be furnished with FFT's Semi-Annual Report to
Shareholders for the six months ended July 31, 1998, and the unaudited
financial statements appearing therein will fairly present the financial
position of FFT as of the respective dates indicated, in conformity with
generally accepted accounting principles applied on a consistent basis.
(g) Fundamental Growth has been furnished with the prospectus and
statement of additional information of FFT, dated April 30, 1998, and said
prospectus and statement of additional information do not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
(h) There are no material legal, administrative or other proceedings
pending or, to the knowledge of FFT, threatened against FFT that assert
liability on the part of FFT or that materially affect its financial condition
or its ability to consummate the Reorganization. FFT is not charged with or, to
the best of its knowledge, threatened with any violation or investigation of
any possible violation of any provisions of any Federal, state or local law or
regulation or administrative ruling relating to any aspect of its business.
(i) There are no material contracts outstanding to which FFT is a party
that have not been disclosed in the N-14 Registration Statement (as defined in
subsection (o) below) or will not otherwise be disclosed to Fundamental Growth
prior to the Valuation Time.
(j) FFT is not a party to or obligated under any provision of its Articles
of Incorporation, as amended, or its by-laws, as amended, or any contract or
other commitment or obligation, and is not subject to any order or decree which
would be violated by its execution of or performance under this Agreement.
(k) FFT has no known liabilities of a material amount, contingent or
otherwise, other than those shown on its statements of assets and liabilities
referred to above, those incurred in the ordinary course of its business as an
investment company since January 31, 1998, and those incurred in connection
with the Reorganization. As of the Valuation Time, FFT will advise Fundamental
Growth in writing of all known liabilities, contingent or otherwise, whether or
not incurred in the ordinary course of business, existing or accrued as of such
time.
(l) FFT has filed, or has obtained extensions to file, all Federal, state
and local tax returns which are required to be filed by it, and has paid or has
obtained extensions to pay, all Federal, state and local taxes shown on said
returns to be due and owing and all assessments received by it, up to and
including the taxable year in which the Exchange Date occurs. All tax
liabilities of FFT have been adequately provided for on its books, and no tax
deficiency or liability of FFT has been asserted and no question with respect
thereto has been raised by the Internal Revenue Service or by any state or
local tax authority for taxes in excess of those already paid, up to and
including the taxable year in which the Exchange Date occurs.
(m) At both the Valuation Time and the Exchange Date, FFT will have full
right, power and authority to sell, assign, transfer and deliver the
Investments. At the Exchange Date, subject only to the delivery of the
Investments as contemplated by this Agreement, FFT will have good and
marketable title to all of the Investments, and Fundamental Growth will acquire
all of the Investments free and clear of any encumbrances, liens or security
interests and without any restrictions upon the transfer thereof (except those
imposed by the Federal or state securities laws and those imperfections of
title or encumbrances as do not materially detract from the value or use of the
Investments or materially affect title thereto).
(n) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by FFT of the
Reorganization, except such as may be required under the Securities Act of
1933, as amended (the "1933 Act"), the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and the 1940 Act or state securities laws (which term
as used herein shall include the laws of the District of Columbia and Puerto
Rico).
I-2
(o) The registration statement filed by Fundamental Growth on Form N-14
relating to the shares of Fundamental Growth to be issued pursuant to this
Agreement, which includes the proxy statement of FFT and the prospectus of
Fundamental Growth with respect to the transaction contemplated herein, and any
supplement or amendment thereto or to the documents therein (as amended, the
"N-14 Registration Statement"), on the effective date of the N-14 Registration
Statement, at the time of the shareholders' meeting referred to in Section 6(a)
of this Agreement and on the Exchange Date, insofar as it relates to FFT (i)
complied or will comply in all material respects with the provisions of the
1933 Act, the 1934 Act and the 1940 Act and the rules and regulations
thereunder, and (ii) did not or will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading; and the prospectus
included therein did not or will not contain any untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; PROVIDED, HOWEVER, that the representations and warranties in this
subsection shall apply only to statements in or omissions from the N-14
Registration Statement made in reliance upon and in conformity with information
furnished by FFT for use in the N-14 Registration Statement as provided in
Section 6(e) of this Agreement.
(p) FFT is authorized to issue 400,000,000 shares of common stock, par
value $.10 per share, divided into four classes, designated Class A, Class B,
Class C and Class D Common Stock, each of which consists of 100,000,000 shares,
each outstanding share of which is fully paid and nonassessable and has full
voting rights.
(q) The books and records of FFT made available to Fundamental Growth
and/or its counsel are substantially true and correct and contain no material
misstatements or omissions with respect to the operations of FFT.
(r) FFT will not sell or otherwise dispose of any of the shares of
Fundamental Growth to be received in the Reorganization, except in distribution
to the shareholders of FFT.
2. REPRESENTATIONS AND WARRANTIES OF FUNDAMENTAL GROWTH.
Fundamental Growth represents and warrants to, and agrees with, FFT that:
(a) Fundamental Growth is a corporation duly organized, validly existing
and in good standing in conformity with the laws of the State of Maryland, and
has the power to own all of its assets and to carry out this Agreement.
Fundamental Growth has all necessary Federal, state and local authorizations to
carry on its business as it is now being conducted and to carry out this
Agreement.
(b) Fundamental Growth is duly registered under the 1940 Act as a
diversified, open-end management investment company (File No. 811-6669), and
such registration has not been revoked or rescinded and is in full force and
effect. Fundamental Growth has elected and qualified for the special tax
treatment afforded RICs under Sections 851-855 of the Code at all times since
its inception and intends to continue to so qualify both until consummation of
the Reorganization and thereafter.
(c) Fundamental Growth has full power and authority to enter into and
perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement has been duly authorized by all necessary action
of its Board of Directors and this Agreement constitutes a valid and binding
contract enforceable in accordance with its terms, subject to the effects of
bankruptcy, insolvency, moratorium, fraudulent conveyance and similar laws
relating to or affecting creditors' rights generally and court decisions with
respect thereto.
(d) FFT has been furnished with a statement of assets and liabilities and
a schedule of investments of Fundamental Growth, each as of August 31, 1997,
said financial statements having been examined by Ernst & Young LLP,
independent public accountants. An unaudited statement of assets and
liabilities of Fundamental Growth and an unaudited schedule of investments of
Fundamental Growth, each as of the Valuation Time, will be furnished to FFT at
or prior to the Exchange Date for the purpose of determining the number of
shares of Fundamental Growth to be issued pursuant to Section 4 of this
Agreement; and each will fairly present the financial position of Fundamental
Growth as of the Valuation Time in conformity with generally accepted
accounting principles applied on a consistent basis.
(e) FFT has been furnished with Fundamental Growth's Semi-Annual Report to
Shareholders for the six months ended February 28, 1998, and the unaudited
financial statements appearing therein fairly present the financial position of
Fundamental Growth as of the respective dates indicated, in conformity with
generally accepted accounting principles applied on a consistent basis.
(f) FFT has been furnished with the prospectus and statement of additional
information of Fundamental Growth, dated November 26, 1997, and said prospectus
and statement of additional information do not contain any untrue statement of
a
I-3
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(g) There are no material legal, administrative or other proceedings
pending or, to the knowledge of Fundamental Growth, threatened against
Fundamental Growth that assert liability on the part of Fundamental Growth or
that materially affect its financial condition or its ability to consummate the
Reorganization. Fundamental Growth is not charged with or, to the best of its
knowledge, threatened with any violation or investigation of any possible
violation of any provisions of any Federal, state or local law or regulation or
administrative ruling relating to any aspect of its business.
(h) There are no material contracts outstanding to which Fundamental
Growth is a party that have not been disclosed in the N-14 Registration
Statement or will not otherwise be disclosed to FFT prior to the Valuation
Time.
(i) Fundamental Growth is not a party to or obligated under any provision
of its Articles of Incorporation, as amended, or its by-laws, as amended, or
any contract or other commitment or obligation, and is not subject to any order
or decree which would be violated by its execution of or performance under this
Agreement.
(j) Fundamental Growth has no known liabilities of a material amount,
contingent or otherwise, other than those shown on Fundamental Growth's
statements of assets and liabilities referred to above, those incurred in the
ordinary course of its business as an investment company since February 28,
1998 and those incurred in connection with the Reorganization. As of the
Valuation Time, Fundamental Growth will advise FFT in writing of all known
liabilities, contingent or otherwise, whether or not incurred in the ordinary
course of business, existing or accrued as of such time.
(k) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by Fundamental Growth
of the Reorganization, except such as may be required under the 1933 Act, the
1934 Act, the 1940 Act or state securities laws.
(l) The N-14 Registration Statement, on its effective date, at the time of
the shareholders' meeting referred to in Section 6(a) of this Agreement and at
the Exchange Date, insofar as it relates to Fundamental Growth (i) complied or
will comply in all material respects with the provisions of the 1933 Act, the
1934 Act and the 1940 Act and the rules and regulations thereunder and (ii) did
not or will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading; and the prospectus included therein did not
or will not contain any untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; PROVIDED, HOWEVER,
that the representations and warranties in this subsection only shall apply to
statements in or omissions from the N-14 Registration Statement made in
reliance upon and in conformity with information furnished by Fundamental
Growth for use in the N-14 Registration Statement as provided in Section 6(e)
of this Agreement.
(m) Fundamental Growth is authorized to issue 400,000,000 shares of common
stock, par value $.10 per share, divided into four classes, designated Class A,
Class B, Class C and Class D Common Stock, each of which consists of
100,000,000 shares, each outstanding share of which is fully paid and
nonassessable and has full voting rights.
(n) The Fundamental Growth shares to be issued to FFT pursuant to this
Agreement will have been duly authorized and, when issued and delivered
pursuant to this Agreement, will be legally and validly issued and will be
fully paid and nonassessable and will have full voting rights, and no
shareholder of Fundamental Growth will have any preemptive right of
subscription or purchase in respect thereof.
(o) At or prior to the Exchange Date, the Fundamental Growth shares to be
transferred to FFT on the Exchange Date will be duly qualified for offering to
the public in all states of the United States in which the sale of shares of
Fundamental Growth presently are qualified, and there are a sufficient number
of such shares registered under the 1933 Act and with each pertinent state
securities commission to permit the transfers contemplated by this Agreement to
be consummated.
(p) At or prior to the Exchange Date, Fundamental Growth will have
obtained any and all regulatory, Director and shareholder approvals necessary
to issue the shares of Fundamental Growth to FFT.
3. THE REORGANIZATION.
(a) Subject to receiving the requisite approval of the shareholders of
FFT, and to the other terms and conditions contained herein, FFT agrees to
convey, transfer and deliver to Fundamental Growth for the benefit of
Fundamental Growth, and Fundamental Growth agrees to acquire from FFT for the
benefit of Fundamental Growth, on the Exchange Date all of the Investments
(including interest accrued as of the Valuation Time on debt instruments) of
FFT, and assume substantially all of the liabilities of FFT, in exchange solely
for that number of shares of Fundamental Growth provided in Section 4 of
I-4
this Agreement. Pursuant to this Agreement, as soon as practicable FFT will
distribute all Fundamental Growth shares received by it to its shareholders in
exchange for their corresponding FFT shares. Such distribution shall be
accomplished by the opening of shareholder accounts on the stock ledger records
of Fundamental Growth in the amounts due the shareholders of FFT based on their
respective holdings in FFT as of the Valuation Time.
(b) FFT will pay or cause to be paid to Fundamental Growth any interest it
receives on or after the Exchange Date with respect to the Investments
transferred to Fundamental Growth hereunder.
(c) The Valuation Time shall be 4:00 P.M., New York time, on November 20,
1998, or such earlier or later day and time as may be mutually agreed upon in
writing (the "Valuation Time").
(d) Fundamental Growth will acquire substantially all of the assets of,
and assume substantially all of the known liabilities of, FFT, except that
recourse for such liabilities will be limited to the net assets of FFT acquired
by Fundamental Growth. The known liabilities of FFT as of the Valuation Time
shall be confirmed in writing to Fundamental Growth by FFT pursuant to Section
1(k) of this Agreement.
(e) Fundamental Growth and FFT will jointly file Articles of Transfer with
the State Department of Assessments and Taxation of Maryland and any such other
instrument as may be required by the State of Maryland to effect the transfer
of Investments of FFT to Fundamental Growth.
(f) FFT will be dissolved following the Exchange Date by filing Articles
of Dissolution with the State Department of Assessments and Taxation of
Maryland.
4. ISSUANCE AND VALUATION OF FUNDAMENTAL GROWTH SHARES IN THE REORGANIZATION.
Full Fundamental Growth shares, and to the extent necessary, a fractional
Fundamental Growth share, of an aggregate net asset value equal to the net
asset value of the assets of FFT acquired, determined as hereinafter provided,
reduced by the amount of liabilities of FFT assumed by Fundamental Growth,
shall be issued by Fundamental Growth in exchange for such assets of FFT. The
net asset value of each of FFT and Fundamental Growth shall be determined in
accordance with the procedures described in the then current Fundamental Growth
prospectus as of the Valuation Time. Such valuation and determination shall be
made by Fundamental Growth in cooperation with FFT. Fundamental Growth shall
issue its Class A, Class B, Class C and Class D shares to FFT in one
certificate or share deposit receipt registered in the name of FFT. FFT shall
distribute Corresponding Shares of Fundamental Growth to its shareholders by
redelivering such certificate or receipt to Financial Data Services, Inc.
5. PAYMENT OF EXPENSES.
(a) With respect to expenses incurred in connection with the
Reorganization, (i) Fundamental Growth shall pay all expenses incurred which
are attributable solely to Fundamental Growth and the conduct of its business,
(ii) FFT shall pay all expenses incurred which are attributable solely to FFT
and the conduct of its business, and (iii) FFT and Fundamental Growth shall
pay, subsequent to the Exchange Date and pro rata according to each Fund's net
assets on the Exchange Date, all expenses incurred in connection with the
Reorganization, including, but not limited to, all costs related to the
preparation and distribution of the N-14 Registration Statement. Such fees and
expenses shall include legal and accounting fees, state securities fees (if
any), printing costs, filing fees, portfolio transfer taxes (if any), and any
similar expenses incurred in connection with the Reorganization.
(b) If for any reason the Reorganization is not consummated, no party
shall be liable to any other party for any damages resulting therefrom,
including, without limitation, consequential damages.
6. COVENANTS OF FFT AND FUNDAMENTAL GROWTH.
(a) FFT agrees to call a special meeting of its shareholders as soon as is
practicable after the effective date of the N-14 Registration Statement for the
purpose of considering the Reorganization as described in this Agreement, and
it shall be a condition to the obligations of each of the parties hereto that
the holders of a majority of the shares of FFT issued and outstanding and
entitled to vote thereon, shall have approved this Agreement at such a meeting
at or prior to the Valuation Time.
(b) FFT and Fundamental Growth each covenants to operate its respective
business as presently conducted between the date hereof and the Exchange Date.
(c) FFT agrees that following the consummation of the Reorganization, it
will dissolve in accordance with the laws of the State of Maryland and any
other applicable law, it will not make any distributions of any Fundamental
Growth shares
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other than to the shareholders of FFT and without first paying or adequately
providing for the payment of all of FFT's liabilities not assumed by
Fundamental Growth, if any, and on and after the Exchange Date it shall not
conduct any business except in connection with its dissolution and
deregistration.
(d) FFT undertakes that if the Reorganization is consummated, it will file
an application pursuant to Section 8(f) of the 1940 Act for an order declaring
that FFT has ceased to be a registered investment company.
(e) Fundamental Growth will file the N-14 Registration Statement with the
Securities and Exchange Commission (the "Commission") and will use its best
efforts to provide that the N-14 Registration Statement becomes effective as
promptly as practicable. FFT and Fundamental Growth agree to cooperate fully
with each other, and each will furnish to the other the information relating to
itself to be set forth in the N-14 Registration Statement as required by the
1933 Act, the 1934 Act, the 1940 Act, and the rules and regulations thereunder
and the state securities or blue sky laws (if applicable).
(f) Fundamental Growth agrees to advise FFT promptly in writing if at any
time prior to the Exchange Date the assets of FFT include any assets which
Fundamental Growth is not permitted, or reasonably believes to be unsuitable
for it, to acquire, including without limitation any security which, prior to
its acquisition by FFT, Fundamental Growth has informed FFT is unsuitable for
Fundamental Growth to acquire. Moreover, Fundamental Growth has no plan or
intention to sell or otherwise dispose of the assets of FFT to be acquired in
the Reorganization, except for dispositions made in the ordinary course of
business.
(g) FFT and Fundamental Growth each agrees that by the Exchange Date all
of its Federal and other tax returns and reports required to be filed on or
before such date shall have been filed and all taxes shown as due on said
returns either have been paid or adequate liability reserves have been provided
for the payment of such taxes. In connection with this covenant, the Funds
agree to cooperate with each other in filing any tax return, amended return or
claim for refund, determining a liability for taxes or a right to a refund of
taxes or participating in or conducting any audit or other proceeding in
respect of taxes. Fundamental Growth agrees to retain for a period of ten (10)
years following the Exchange Date all returns, schedules and work papers and
all material records or other documents relating to tax matters of FFT for its
taxable period first ending after the Exchange Date and for all prior taxable
periods. Any information obtained under this subsection shall be kept
confidential except as otherwise may be necessary in connection with the filing
of returns or claims for refund or in conducting an audit or other proceeding.
After the Exchange Date, FFT shall prepare, or cause its agents to prepare, any
Federal, state or local tax returns, including any Forms 1099, required to be
filed by FFT with respect to FFT's final taxable year ending with its complete
liquidation and for any prior periods or taxable years and further shall cause
such tax returns and Forms 1099 to be duly filed with the appropriate taxing
authorities. Notwithstanding the aforementioned provisions of this subsection,
any expenses incurred by FFT (other than for payment of taxes) in connection
with the preparation and filing of said tax returns and Forms 1099 after the
Exchange Date shall be borne by FFT to the extent such expenses have been
accrued by FFT in the ordinary course without regard to the Reorganization; any
excess expenses shall be borne by Merrill Lynch Asset Management, L.P. ("MLAM")
at the time such tax returns and Forms 1099 are prepared.
(h) FFT agrees to mail to its shareholders of record entitled to vote at
the special meeting of shareholders at which action is to be considered
regarding this Agreement, in sufficient time to comply with requirements as to
notice thereof, a combined Proxy Statement and Prospectus which complies in all
material respects with the applicable provisions of Section 14(a) of the 1934
Act and Section 20(a) of the 1940 Act, and the rules and regulations,
respectively, thereunder.
(i) Following the consummation of the Reorganization, Fundamental Growth
expects to stay in existence and continue its business as an open-end
management investment company registered under the 1940 Act.
7. EXCHANGE DATE.
(a) Delivery of the assets of FFT to be transferred, together with any
other Investments, and the Fundamental Growth shares to be issued, shall be
made at the offices of Swidler Berlin Shereff Friedman, LLP ("SBSF"), 919 Third
Avenue, New York, New York 10022, at 10:00 A.M. on the next full business day
following the Valuation Time, or at such other place, time and date agreed to
by FFT and Fundamental Growth, the date and time upon which such delivery is to
take place being referred to herein as the "Exchange Date." To the extent that
any Investments, for any reason, are not transferable on the Exchange Date, FFT
shall cause such Investments to be transferred to Fundamental Growth's account
with The Chase Manhattan Bank at the earliest practicable date thereafter.
(b) FFT will deliver to Fundamental Growth on the Exchange Date
confirmations or other adequate evidence as to the tax basis of each of the
Investments delivered to Fundamental Growth hereunder, certified by Deloitte &
Touche LLP.
I-6
(c) As soon as practicable after the close of business on the Exchange
Date, FFT shall deliver to Fundamental Growth a list of the names and addresses
of all of the shareholders of record of FFT on the Exchange Date and the number
of shares of FFT owned by each such shareholder, certified to the best of their
knowledge and belief by the transfer agent for FFT or by its President.
8. FFT CONDITIONS.
The obligations of FFT hereunder shall be subject to the following
conditions:
(a) That this Agreement shall have been adopted, and the Reorganization
shall have been approved, by the affirmative vote of the holders of a majority
of the shares of FFT, issued and outstanding and entitled to vote thereon,
voting together as a single class, and by the Board of Directors of Fundamental
Growth; and that Fundamental Growth shall have delivered to FFT a copy of the
resolution approving this Agreement adopted by Fundamental Growth's Board of
Directors, certified by the Secretary of Fundamental Growth.
(b) That Fundamental Growth shall have furnished to FFT a statement of
Fundamental Growth's assets and liabilities, with values determined as provided
in Section 4 of this Agreement, together with a schedule of its investments,
all as of the Valuation Time, certified on Fundamental Growth's behalf by its
President (or any Vice President) and its Treasurer, and a certificate signed
by Fundamental Growth's President (or any Vice President) and its Treasurer,
dated as of the Exchange Date, certifying that as of the Valuation Time and as
of the Exchange Date there has been no material adverse change in the financial
position of Fundamental Growth since February 28, 1998 other than changes in
its portfolio securities since that date or changes in the market value of its
portfolio securities.
(c) That Fundamental Growth shall have furnished to FFT a certificate
signed by Fundamental Growth's President (or any Vice President) and its
Treasurer, dated as of the Exchange Date, certifying that, as of the Valuation
Time and as of the Exchange Date all representations and warranties of
Fundamental Growth made in this Agreement are true and correct in all material
respects with the same effect as if made at and as of such dates, and that
Fundamental Growth has complied with all of the agreements and satisfied all of
the conditions on its part to be performed or satisfied at or prior to each of
such dates.
(d) That there shall not be any material litigation pending with respect
to the matters contemplated by this Agreement.
(e) That FFT shall have received an opinion of Brown & Wood LLP, as
counsel to Fundamental Growth, in form and substance satisfactory to FFT and
dated the Exchange Date, to the effect that (i) Fundamental Growth is a
corporation duly organized, validly existing and in good standing in conformity
with the laws of the State of Maryland; (ii) the Corresponding Shares of
Fundamental Growth to be delivered to FFT shareholders as provided for by this
Agreement are duly authorized and, upon delivery, will be validly issued and
outstanding and fully paid and nonassessable by Fundamental Growth, and no
shareholder of Fundamental Growth has any preemptive right to subscription or
purchase in respect thereof (pursuant to the Articles of Incorporation, as
amended, or the by-laws of Fundamental Growth or, to the best of such counsel's
knowledge, otherwise); (iii) this Agreement has been duly authorized, executed
and delivered by Fundamental Growth, and represents a valid and binding
contract, enforceable in accordance with its terms, subject to the effects of
bankruptcy, insolvency, moratorium, fraudulent conveyance and similar laws
relating to or affecting creditors' rights generally and court decisions with
respect thereto; PROVIDED, that such counsel shall express no opinion with
respect to the application of equitable principles in any proceeding, whether
at law or in equity; (iv) the execution and delivery of this Agreement does
not, and the consummation of the Reorganization will not, violate any material
provisions of the Articles of Incorporation, as amended, the by-laws, as
amended, of Fundamental Growth or any agreement (known to such counsel) to
which Fundamental Growth is a party or by which Fundamental Growth is bound,
except insofar as the parties have agreed to amend such provision as a
condition precedent to the Reorganization, or Maryland law; (v) no consent,
approval, authorization or order of any United States Federal court, Maryland
state court or governmental authority is required for the consummation by
Fundamental Growth of the Reorganization, except such as have been obtained
under the 1933 Act, the 1934 Act and the 1940 Act and the published rules and
regulations of the Commission thereunder and under Maryland law and such as may
be required under state securities laws; (vi) the N-14 Registration Statement
has become effective under the 1933 Act, no stop order suspending the
effectiveness of the N-14 Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or
contemplated under the 1933 Act, and the N-14 Registration Statement, and each
amendment or supplement thereto, as of their respective effective dates, appear
on their face to be appropriately responsive in all material respects to the
requirements of the 1933 Act, the 1934 Act and the 1940 Act and the published
rules and regulations of the Commission thereunder; (vii) the descriptions in
the N-14 Registration Statement of statutes, legal and governmental proceedings
and contracts and other documents are accurate and fairly present the
information required to be shown;
I-7
(viii) such counsel does not know of any statutes, legal or governmental
proceedings or contracts or other documents related to the Reorganization of a
character required to be described in the N-14 Registration Statement which are
not described therein or, if required to be filed, filed as required; (ix)
Fundamental Growth, to the knowledge of such counsel, is not required to
qualify to do business as a foreign corporation in any jurisdiction except as
may be required by state securities or blue sky laws, and except where
Fundamental Growth has so qualified or the failure so to qualify would not have
a material adverse effect on Fundamental Growth or its shareholders; (x) such
counsel does not have actual knowledge of any material suit, action or legal or
administrative proceeding pending or threatened against Fundamental Growth, the
unfavorable outcome of which would materially and adversely affect Fundamental
Growth; and (xi) all corporate actions required to be taken by Fundamental
Growth to authorize this Agreement and to effect the Reorganization have been
duly authorized by all necessary corporate actions on the part of Fundamental
Growth and (xii) such opinion is solely for the benefit of FFT and its
Directors and officers. Such opinion also shall state that (aa) while such
counsel cannot make any representation as to the accuracy or completeness of
statements of fact in the N-14 Registration Statement or any amendment or
supplement thereto, nothing has come to their attention that would lead them to
believe that, on the respective effective dates of the N-14 Registration
Statement and any amendment or supplement thereto, (1) the N-14 Registration
Statement or any amendment or supplement thereto contained any untrue statement
of a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading; and (2) the
prospectus included in the N-14 Registration Statement contained any untrue
statement of a material fact or omitted to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; and (bb) such counsel does not express any opinion
or belief as to the financial statements or other financial or statistical data
relating to Fundamental Growth contained or incorporated by reference in the
N-14 Registration Statement. In giving the opinion set forth above, Brown &
Wood LLP may state that it is relying on certificates of officers of
Fundamental Growth with regard to matters of fact and certain certificates and
written statements of governmental officials with respect to the good standing
of Fundamental Growth.
(f) That FFT shall have received either (a) a private letter ruling from
the Internal Revenue Service or (b) an opinion of Brown & Wood LLP, to the
effect that for Federal income tax purposes (i) the transfer of substantially
all of the Investments of FFT to Fundamental Growth in exchange solely for
shares of Fundamental Growth and assumption of FFT's liabilities as provided in
this Agreement will constitute a reorganization within the meaning of Section
368(a)(1)(C) of the Code, and FFT and Fundamental Growth will each be deemed to
be a "party" to the Reorganization within the meaning of Section 368(b); (ii)
in accordance with Section 361(a) of the Code, no gain or loss will be
recognized to FFT as a result of the asset transfer solely in exchange for
Fundamental Growth shares and the assumption of liabilities or on the
distribution of the Fundamental Growth stock to FFT shareholders under Section
361(c)(1); (iii) under Section 1032 of the Code, no gain or loss will be
recognized to Fundamental Growth on the receipt of assets of FFT in exchange
for Fundamental Growth shares; (iv) in accordance with Section 354(a)(1) of the
Code, no gain or loss will be recognized to the shareholders of FFT on the
receipt of Corresponding Shares of Fundamental Growth in exchange for their
shares of FFT; (v) in accordance with Section 362(b) of the Code, the tax basis
of the FFT assets in the hands of Fundamental Growth will be the same as the
tax basis of such assets in the hands of FFT immediately prior to the
consummation of the Reorganization; (vi) in accordance with Section 358 of the
Code, immediately after the Reorganization, the tax basis of the Corresponding
Shares of Fundamental Growth received by the shareholders of FFT in the
Reorganization will be equal, in the aggregate, to the tax basis of the shares
of FFT surrendered in exchange; (vii) in accordance with Section 1223 of the
Code, a shareholder's holding period for the Corresponding Shares of
Fundamental Growth will be determined by including the period for which such
shareholder held the shares of FFT exchanged therefor, PROVIDED, that such FFT
shares were held as a capital asset; (viii) in accordance with Section 1223 of
the Code, Fundamental Growth's holding period with respect to the FFT assets
transferred will include the period for which such assets were held by FFT; and
(ix) the taxable year of FFT will end on the effective date of the
Reorganization and pursuant to Section 381(a) of the Code and regulations
thereunder, Fundamental Growth will succeed to and take into account certain
tax attributes of FFT, such as earnings and profits, capital loss carryovers
and method of accounting.
(g) That all proceedings taken by Fundamental Growth and its counsel in
connection with the Reorganization and all documents incidental thereto shall
be satisfactory in form and substance to FFT.
(h) That the N-14 Registration Statement shall have become effective under
the 1933 Act, and no stop order suspending such effectiveness shall have been
instituted or, to the knowledge of Fundamental Growth, contemplated by the
Commission.
(i) That FFT shall have received from Ernst & Young LLP a letter dated as
of the effective date of the N-14 Registration Statement and a similar letter
dated within five days prior to the Exchange Date, in form and substance
satisfactory to FFT, to the effect that (i) they are independent public
accountants with respect to Fundamental Growth within the meaning
I-8
of the 1933 Act and the applicable published rules and regulations thereunder;
(ii) in their opinion, the financial statements and supplementary information
of Fundamental Growth included or incorporated by reference in the N-14
Registration Statement and reported on by them comply as to form in all
material respects with the applicable accounting requirements of the 1933 Act
and the published rules and regulations thereunder; and (iii) on the basis of
limited procedures agreed upon by FFT and Fundamental Growth and described in
such letter (but not an examination in accordance with generally accepted
auditing standards) consisting of a reading of any unaudited interim financial
statements and unaudited supplementary information of Fundamental Growth
included in the N-14 Registration Statement, and inquiries of certain officials
of Fundamental Growth responsible for financial and accounting matters, nothing
came to their attention that caused them to believe that (a) such unaudited
financial statements and related unaudited supplementary information do not
comply as to form in all material respects with the applicable accounting
requirements of the 1933 Act and the published rules and regulations
thereunder, (b) such unaudited financial statements are not fairly presented in
conformity with generally accepted accounting principles, applied on a basis
substantially consistent with that of the audited financial statements, or (c)
such unaudited supplementary information is not fairly stated in all material
respects in relation to the unaudited financial statements taken as a whole;
and (iv) on the basis of limited procedures agreed upon by FFT and Fundamental
Growth and described in such letter (but not an examination in accordance with
generally accepted auditing standards), the information relating to Fundamental
Growth appearing in the N-14 Registration Statement, which information is
expressed in dollars (or percentages derived from such dollars) (with the
exception of performance comparisons, if any), if any, has been obtained from
the accounting records of Fundamental Growth or from schedules prepared by
officials of Fundamental Growth having responsibility for financial and
reporting matters and such information is in agreement with such records,
schedules or computations made therefrom.
(j) That the Commission shall not have issued an unfavorable advisory
report under Section 25(b) of the 1940 Act, nor instituted or threatened to
institute any proceeding seeking to enjoin consummation of the Reorganization
under Section 25(c) of the 1940 Act, and no other legal, administrative or
other proceeding shall be instituted or threatened which would materially
affect the financial condition of Fundamental Growth or would prohibit the
Reorganization.
(k) That FFT shall have received from the Commission such orders or
interpretations as SBSF, as counsel to FFT, deems reasonably necessary or
desirable under the 1933 Act and the 1940 Act in connection with the
Reorganization, PROVIDED, that such counsel shall have requested such orders as
promptly as practicable, and all such orders shall be in full force and effect.
9. FUNDAMENTAL GROWTH CONDITIONS.
The obligations of Fundamental Growth hereunder shall be subject to the
following conditions:
(a) That this Agreement shall have been adopted, and the Reorganization
shall have been approved, by the Board of Directors of FFT and by the
affirmative vote of the holders of a majority of the shares of common stock of
FFT issued and outstanding and entitled to vote thereon, voting together as a
single class; and that FFT shall have delivered to Fundamental Growth a copy of
the resolution approving this Agreement adopted by FFT's Board of Directors,
and a certificate setting forth the vote FFT shareholders obtained, each
certified by the Secretary of FFT.
(b) That FFT shall have furnished to Fundamental Growth a statement of
FFT's assets and liabilities, with values determined as provided in Section 4
of this Agreement, together with a schedule of investments with their
respective dates of acquisition and tax costs, all as of the Valuation Time,
certified on FFT's behalf by its President (or any Vice President) and its
Treasurer, and a certificate of both such officers, dated the Exchange Date,
certifying that as of the Valuation Time and as of the Exchange Date there has
been no material adverse change in the financial position of FFT since January
31, 1998, other than changes in the Investments since that date or changes in
the market value of the Investments.
(c) That FFT shall have furnished to Fundamental Growth a certificate
signed by FFT's President (or any Vice President) and its Treasurer, dated the
Exchange Date, certifying that as of the Valuation Time and as of the Exchange
Date all representations and warranties of FFT made in this Agreement are true
and correct in all material respects with the same effect as if made at and as
of such dates and FFT has complied with all of the agreements and satisfied all
of the conditions on its part to be performed or satisfied at or prior to such
dates.
(d) That there shall not be any material litigation pending with respect
to the matters contemplated by this Agreement.
(e) That Fundamental Growth shall have received an opinion of Brown & Wood
LLP, as Maryland counsel to FFT, in form and substance satisfactory to
Fundamental Growth and dated the Exchange Date, to the effect that (i) FFT is a
corporation duly organized, validly existing and in good standing in conformity
with the laws of the State of Maryland; (ii) this
I-9
Agreement has been duly authorized, executed and delivered by FFT, and
represents a valid and binding contract, enforceable in accordance with its
terms, subject to the effects of bankruptcy, insolvency, moratorium, fraudulent
conveyance and similar laws relating to or affecting creditors' rights
generally and court decisions with respect thereto, PROVIDED, that such counsel
shall express no opinion with respect to the application of equitable
principles in any proceeding, whether at law or in equity; (iii) FFT has the
power to sell, assign, transfer and deliver the assets transferred by it
hereunder and, upon consummation of the Reorganization in accordance with the
terms of this Agreement, FFT will have duly transferred such assets and
liabilities in accordance with this Agreement; (iv) the execution and delivery
of this Agreement does not, and the consummation of the Reorganization will
not, violate any material provisions of the Articles of Incorporation, as
amended, the by-laws of FFT, as amended, or Maryland law; (v) no consent,
approval, authorization or order of any Maryland court or governmental
authority is required for the consummation by FFT of the Reorganization, except
such as have been obtained under Maryland law; and (vi) such opinion is solely
for the benefit of Fundamental Growth and its Directors and officers. In giving
the opinion set forth above, Brown & Wood LLP may state that it is relying on
certificates of officers of FFT with regard to matters of fact and certain
certificates and written statements of government officials with respect to the
good standing of FFT.
(f) That Fundamental Growth shall have received an opinion of SBSF, as
counsel to FFT, in form and substance satisfactory to Fundamental Growth and
dated the Exchange Date, to the effect that (i) no consent, approval,
authorization or order of any United States Federal court or governmental
authority is required for the consummation by FFT of the Reorganization, except
such as have been obtained under the 1933 Act, the 1934 Act and the 1940 Act
and the published rules and regulations of the Commission thereunder and such
as may be required under state securities laws; (ii) the proxy statement of FFT
contained in the N-14 Registration Statement, and each amendment or supplement
thereto, as of their respective effective dates, appear on their face to be
appropriately responsive in all material respects to the requirements of the
1934 Act and the 1940 Act and the published rules and regulations of the
Commission thereunder; (iii) the descriptions in the proxy statement of FFT
contained in the N-14 Registration Statement of statutes, legal and
governmental proceedings and contracts and other documents are accurate and
fairly present the information required to be shown; (iv) such counsel does not
know of any statutes, legal or governmental proceedings or contracts or other
documents related to the Reorganization of a character required to be described
in the N-14 Registration Statement which are not described therein or, if
required to be filed, filed as required; (v) the execution and delivery of this
Agreement does not, and the consummation of the Reorganization will not,
violate any material provisions of any agreement (known to such counsel) to
which FFT is a party or by which FFT is bound, except insofar as the parties
have agreed to amend such provision as a condition precedent to the
Reorganization; (vi) FFT, to the knowledge of such counsel, is not required to
qualify to do business as a foreign corporation in any jurisdiction except as
may be required by state securities or blue sky laws, and except where each has
so qualified or the failure so to qualify would not have a material adverse
effect on FFT or its shareholders; (vii) such counsel does not have actual
knowledge of any material suit, action or legal or administrative proceeding
pending or threatened against FFT, the unfavorable outcome of which would
materially and adversely affect FFT; (viii) all corporate actions required to
be taken by FFT to authorize this Agreement and to effect the Reorganization
have been duly authorized by all necessary corporate actions on the part of
Fund For Tomorrow; and (ix) such opinion is solely for the benefit of
Fundamental Growth and its Directors and officers. Such opinion also shall
state that (aa) while such counsel cannot make any representation as to the
accuracy or completeness of statements of fact in the N-14 Registration
Statement or any amendment or supplement thereto, nothing has come to their
attention that would lead them to believe that, on the respective effective
dates of the N-14 Registration Statement and any amendment or supplement
thereto, (1) the proxy statement of FFT contained in the N-14 Registration
Statement or any amendment or supplement thereto contained any untrue statement
of a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading; and (2) the
proxy statement of FFT contained in the N-14 Registration Statement contained
any untrue statement of a material fact or omitted to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and (bb) such counsel does not
express any opinion or belief as to the financial statements or other financial
or statistical data relating to FFT contained or incorporated by reference in
the N-14 Registration Statement. In giving the opinion set forth above, SBSF
may state that it is relying on certificates of officers of FFT with regard to
matters of fact and certain certificates and written statements of governmental
officials with respect to the good standing of FFT and the opinion of Brown &
Wood LLP as to matters of Maryland law.
(g) That Fundamental Growth shall have received a private letter ruling
from the Internal Revenue Service or an opinion of Brown & Wood LLP with
respect to the matters specified in Section 8(f) of this Agreement.
(h) That all proceedings taken by FFT and its counsel in connection with
the Reorganization and all documents incidental thereto shall be satisfactory
in form and substance to Fundamental Growth.
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(i) That the N-14 Registration Statement shall have become effective under
the 1933 Act and no stop order suspending such effectiveness shall have been
instituted or, to the knowledge of FFT, contemplated by the Commission.
(j) That Fundamental Growth shall have received from Deloitte & Touche LLP
a letter dated as of the effective date of the N-14 Registration Statement and
a similar letter dated within five days prior to the Exchange Date, in form and
substance satisfactory to Fundamental Growth, to the effect that (i) they are
independent public accountants with respect to FFT within the meaning of the
1933 Act and the applicable published rules and regulations thereunder; (ii) in
their opinion, the financial statements and supplementary information of FFT
included or incorporated by reference in the N-14 Registration Statement and
reported on by them comply as to form in all material respects with the
applicable accounting requirements of the 1933 Act and the published rules and
regulations thereunder; (iii) on the basis of limited procedures agreed upon by
FFT and Fundamental Growth and described in such letter (but not an examination
in accordance with generally accepted auditing standards) consisting of a
reading of any unaudited interim financial statements and unaudited
supplementary information of FFT included in the N-14 Registration Statement,
and inquiries of certain officials of FFT responsible for financial and
accounting matters, nothing came to their attention that caused them to believe
that (a) such unaudited financial statements and related unaudited
supplementary information do not comply as to form in all material respects
with the applicable accounting requirements of the 1933 Act and the published
rules and regulations thereunder, (b) such unaudited financial statements are
not fairly presented in conformity with generally accepted accounting
principles, applied on a basis substantially consistent with that of the
audited financial statements, or (c) such unaudited supplementary information
is not fairly stated in all material respects in relation to the unaudited
financial statements taken as a whole; and (iv) on the basis of limited
procedures agreed upon by Fundamental Growth and FFT and described in such
letter (but not an examination in accordance with generally accepted auditing
standards), the information relating to FFT appearing in the N-14 Registration
Statement, which information is expressed in dollars (or percentages derived
from such dollars) (with the exception of performance comparisons, if any), if
any, has been obtained from the accounting records of FFT or from schedules
prepared by officials of FFT having responsibility for financial and reporting
matters and such information is in agreement with such records, schedules or
computations made therefrom.
(k) That the Commission shall not have issued an unfavorable advisory
report under Section 25(b) of the 1940 Act, nor instituted or threatened to
institute any proceeding seeking to enjoin consummation of the Reorganization
under Section 25(c) of the 1940 Act, and no other legal, administrative or
other proceeding shall be instituted or threatened which would materially
affect the financial condition of FFT or would prohibit the Reorganization.
(l) That Fundamental Growth shall have received from the Commission such
orders or interpretations as Brown & Wood LLP, as counsel to Fundamental
Growth, deems reasonably necessary or desirable under the 1933 Act and the 1940
Act in connection with the Reorganization, PROVIDED, that such counsel shall
have requested such orders as promptly as practicable, and all such orders
shall be in full force and effect.
(m) That the Investments to be transferred to Fundamental Growth shall not
include any assets or liabilities which Fundamental Growth, by reason of
charter limitations or otherwise, may not properly acquire or assume.
(n) That FFT shall have delivered to Fundamental Growth a letter from
Deloitte & Touche LLP, dated the Exchange Date, stating that such firm has
performed a limited review of the Federal, state and local income tax returns
of FFT for the period ended January 31, 1998 (which returns originally were
prepared and filed by FFT), and that based on such limited review, nothing came
to their attention which caused them to believe that such returns did not
properly reflect, in all material respects, the Federal, state and local income
taxes of FFT for the period covered thereby; and that for the period from
February 1, 1998, to and including the Exchange Date and for any taxable year
of FFT ending upon the liquidation of FFT, such firm has performed a limited
review to ascertain the amount of applicable Federal, state and local taxes,
and has determined that either such amount has been paid or reserves
established for payment of such taxes, this review to be based on unaudited
financial data; and that based on such limited review, nothing has come to
their attention which caused them to believe that the taxes paid or reserves
set aside for payment of such taxes were not adequate in all material respects
for the satisfaction of Federal, state and local taxes for the period from
February 1, 1998, to and including the Exchange Date and for any taxable year
of FFT ending upon the liquidation of FFT or that FFT would not continue to
qualify as a regulated investment company for Federal income tax purposes.
(o) That prior to the Exchange Date, FFT shall have declared a dividend or
dividends which, together with all such previous dividends, shall have the
effect of distributing to its shareholders all of its investment company taxable
income for the period from July 1, 1998 to and including the Exchange Date, if
any (computed without regard to any deduction for dividends paid), and all of
its net capital gain, if any, realized for the period from February 1, 1998 to
and including the Exchange Date.
I-11
10. TERMINATION, POSTPONEMENT AND WAIVERS.
(a) Notwithstanding anything contained in this Agreement to the contrary,
this Agreement may be terminated and the Reorganization abandoned at any time
(whether before or after adoption thereof by the shareholders of FFT) prior to
the Exchange Date, or the Exchange Date may be postponed, (i) by mutual consent
of the Boards of Directors of FFT and Fundamental Growth; (ii) by the Board of
Directors of FFT if any condition of FFT's obligations set forth in Section 8
of this Agreement has not been fulfilled or waived by such Board; or (iii) by
the Board of Directors of Fundamental Growth if any condition of Fundamental
Growth's obligations set forth in Section 9 of this Agreement has not been
fulfilled or waived by such Board.
(b) If the transactions contemplated by this Agreement have not been
consummated by June 1, 1999, this Agreement automatically shall terminate on
that date, unless a later date is mutually agreed to by the Boards of Directors
of FFT and Fundamental Growth.
(c) In the event of termination of this Agreement pursuant to the
provisions hereof, the same shall become void and have no further effect, and
there shall not be any liability on the part of either FFT or Fundamental
Growth or persons who are their directors, trustees, officers, agents or
shareholders in respect of this Agreement.
(d) At any time prior to the Exchange Date, any of the terms or conditions
of this Agreement may be waived by the Board of Directors of either FFT or
Fundamental Growth, respectively (whichever is entitled to the benefit
thereof), if, in the judgment of such Board after consultation with its
counsel, such action or waiver will not have a material adverse effect on the
benefits intended under this Agreement to the shareholders of their respective
fund, on behalf of which such action is taken. In addition, the Boards of
Directors of FFT and Fundamental Growth have delegated to MLAM the ability to
make non-material changes to the transaction if it deems it to be in the best
interests of FFT and Fundamental Growth to do so.
(e) The respective representations and warranties contained in Sections 1
and 2 of this Agreement shall expire with, and be terminated by, the
consummation of the Reorganization, and neither FFT nor Fundamental Growth nor
any of their officers, directors or trustees, agents or shareholders shall have
any liability with respect to such representations or warranties after the
Exchange Date. This provision shall not protect any officer, director or
trustee, agent or shareholder of FFT or Fundamental Growth against any
liability to the entity for which that officer, director or trustee, agent or
shareholder so acts or to its shareholders, to which that officer, director or
trustee, agent or shareholder otherwise would be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
in the conduct of such office.
(f) If any order or orders of the Commission with respect to this
Agreement shall be issued prior to the Exchange Date and shall impose any terms
or conditions which are determined by action of the Boards of Directors of FFT
and Fundamental Growth to be acceptable, such terms and conditions shall be
binding as if a part of this Agreement without further vote or approval of the
shareholders of FFT unless such terms and conditions shall result in a change
in the method of computing the number of shares of Fundamental Growth to be
issued to FFT in which event, unless such terms and conditions shall have been
included in the proxy solicitation materials furnished to the shareholders of
FFT prior to the meetings at which the Reorganization shall have been approved,
this Agreement shall not be consummated and shall terminate unless FFT promptly
shall call a special meeting of shareholders at which such conditions so
imposed shall be submitted for approval.
11. INDEMNIFICATION.
(a) FFT hereby agrees to indemnify and hold Fundamental Growth harmless
from all loss, liability and expense (including reasonable counsel fees and
expenses in connection with the contest of any claim) which Fundamental Growth
may incur or sustain by reason of the fact that (i) Fundamental Growth shall be
required to pay any corporate obligation of FFT, whether consisting of tax
deficiencies or otherwise, based upon a claim or claims against FFT which were
omitted or not fairly reflected in the financial statements to be delivered to
Fundamental Growth in connection with the Reorganization; (ii) any
representations or warranties made by FFT in this Agreement should prove to be
false or erroneous in any material respect; (iii) any covenant of FFT has been
breached in any material respect; or (iv) any claim is made alleging that (a)
the N-14 Registration Statement included any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary to make the statements therein not misleading or (b) the Proxy
Statement and Prospectus delivered to the shareholders of FFT and forming a
part of the N-14 Registration Statement included any untrue statement of a
material fact or omitted to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except insofar as such claim is based on written
information furnished by Fundamental Growth to FFT.
I-12
(b) Fundamental Growth hereby agrees to indemnify and hold FFT harmless
from all loss, liability and expenses (including reasonable counsel fees and
expenses in connection with the contest of any claim) which FFT may incur or
sustain by reason of the fact that (i) any representations or warranties made
by Fundamental Growth in this Agreement should prove false or erroneous in any
material respect, (ii) any covenant of Fundamental Growth has been breached in
any material respect, or (iii) any claim is made alleging that (a) the N-14
Registration Statement included any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary
to make the statements therein, not misleading or (b) the Proxy Statement and
Prospectus delivered to shareholders of FFT and forming a part of the N-14
Registration Statement included any untrue statement of a material fact or
omitted to state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
except insofar as such claim is based on written information furnished by FFT
to Fundamental Growth.
(c) In the event that any claim is made against Fundamental Growth in
respect of which indemnity may be sought by Fundamental Growth from FFT under
Section 11(a) of this Agreement, or in the event that any claim is made against
FFT in respect of which indemnity may be sought by FFT from Fundamental Growth
under Section 11(b) of this Agreement, then the party seeking indemnification
(the "Indemnified Party"), with reasonable promptness and before payment of
such claim, shall give written notice of such claim to the other party (the
"Indemnifying Party"). If no objection as to the validity of the claim is made
in writing to the Indemnified Party by the Indemnifying Party within thirty
(30) days after the giving of notice hereunder, then the Indemnified Party may
pay such claim and shall be entitled to reimbursement therefor, pursuant to
this Agreement. If, prior to the termination of such thirty-day period,
objection in writing as to the validity of such claim is made to the
Indemnified Party, the Indemnified Party shall withhold payment thereof until
the validity of such claim is established (i) to the satisfaction of the
Indemnifying Party, or (ii) by a final determination of a court of competent
jurisdiction, whereupon the Indemnified Party may pay such claim and shall be
entitled to reimbursement thereof, pursuant to this Agreement, or (iii) with
respect to any tax claims, within seven (7) calendar days following the earlier
of (A) an agreement between FFT and Fundamental Growth that an indemnity amount
is payable, (B) an assessment of a tax by a taxing authority, or (C) a
"determination" as defined in Section 1313(a) of the Code. For purposes of this
Section 11, the term "assessment" shall have the same meaning as used in
Chapter 63 of the Code and Treasury Regulations thereunder, or any comparable
provision under the laws of the appropriate taxing authority. In the event of
any objection by the Indemnifying Party, the Indemnifying Party promptly shall
investigate the claim, and if it is not satisfied with the validity thereof,
the Indemnifying Party shall conduct the defense against such claim. All costs
and expenses incurred by the Indemnifying Party in connection with such
investigation and defense of such claim shall be borne by it. These
indemnification provisions are in addition to, and not in limitation of, any
other rights the parties may have under applicable law.
12. OTHER MATTERS.
(a) Pursuant to Rule 145 under the 1933 Act, and in connection with the
issuance of any shares to any person who at the time of the Reorganization is,
to its knowledge, an affiliate of a party to the Reorganization pursuant to
Rule 145(c), Fundamental Growth will cause to be affixed upon the
certificate(s) issued to such person (if any) a legend as follows:
THESE SHARES ARE SUBJECT TO RESTRICTIONS ON TRANSFER UNDER THE SECURITIES
ACT OF 1933 AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT TO MERRILL
LYNCH FUNDAMENTAL GROWTH FUND, INC. (OR ITS STATUTORY SUCCESSOR) OR ITS
PRINCIPAL UNDERWRITER UNLESS (I) A REGISTRATION STATEMENT WITH RESPECT
THERETO IS EFFECTIVE UNDER THE SECURITIES ACT OF 1933 OR (II) IN THE
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE FUND, SUCH REGISTRATION
IS NOT REQUIRED.
and, further, that stop transfer instructions will be issued to Fundamental
Growth's transfer agent with respect to such shares. FFT will provide
Fundamental Growth on the Exchange Date with the name of any FFT shareholder
who is to the knowledge of FFT an affiliate of it on such date.
(b) All covenants, agreements, representations and warranties made under
this Agreement and any certificates delivered pursuant to this Agreement shall
be deemed to have been material and relied upon by each of the parties,
notwithstanding any investigation made by them or on their behalf.
(c) Any notice, report or demand required or permitted by any provision of
this Agreement shall be in writing and shall be made by hand delivery, prepaid
certified mail or overnight service, addressed to FFT or Fundamental Growth, in
either case at 800 Scudders Mill Road, Plainsboro, New Jersey 08536, Attn.:
Arthur Zeikel, President.
I-13
(d) This Agreement supersedes all previous correspondence and oral
communications between the parties regarding the Reorganization, constitutes
the only understanding with respect to the Reorganization, may not be changed
except by a letter of agreement signed by each party and shall be governed by
and construed in accordance with the laws of the State of New York applicable
to agreements made and to be performed in said state.
(e) Copies of the Articles of Incorporation, as amended, of FFT and
Fundamental Growth are on file with the Department of Assessments and Taxation
of the State of Maryland and notice is hereby given that this instrument is
executed on behalf of the Directors of each fund.
This Agreement may be executed in any number of counterparts, each of
which, when executed and delivered, shall be deemed to be an original but all
such counterparts together shall constitute but one instrument.
MERRILL LYNCH FUND FOR TOMORROW, INC.
By: /S/ ARTHUR ZEIKEL
-------------------------------------
ARTHUR ZEIKEL, PRESIDENT
Attest:
/S/ SUSAN B. BAKER
- ------------------------------------
SUSAN B. BAKER, SECRETARY
MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.
By: /S/ ARTHUR ZEIKEL
-------------------------------------
ARTHUR ZEIKEL, PRESIDENT
Attest:
/S/ BARBARA G. FRASER
- ------------------------------------
BARBARA G. FRASER, SECRETARY
I-14
MERRILL LYNCH FUND FOR TOMORROW, INC.
P.O. BOX 9011
PRINCETON, NEW JERSEY 08543-9011
P R O X Y
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Arthur Zeikel, Terry K. Glenn and Susan B. Baker as proxies, each with the power to
appoint his or her substitute, and hereby authorizes each of them to represent and to vote, as designated on the reverse
hereof, all of the shares of common stock of Merrill Lynch Fund For Tomorrow, Inc. (the "Fund") held of record by the
undersigned on August 25, 1998, at a Special Meeting of Stockholders of the Fund to be held on October 13, 1998, or any
adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER HEREIN DIRECTED BY THE UNDERSIGNED STOCKHOLDER. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSAL 1.
By signing and dating the reverse side of this card, you authorize the proxies to vote each proposal as marked, or if
not marked, to vote "FOR" each proposal, and to use their discretion to vote for any other matter as may properly come
before the meeting or any adjournment thereof. If you do not intend to personally attend the meeting, please complete and
return this card at once in the enclosed envelope.
(Continued and to be signed on the reverse side)
1. To approve the Agreement and Plan of Reorganization between Merrill Lynch FOR [ ] AGAINST [ ] ABSTAIN [ ]
Fund For Tomorrow, Inc. and Merrill Lynch Fundamental Growth Fund, Inc.
2. To transact such other business as properly may come before the meeting or
any adjournment thereof.
Please sign exactly as name appears
hereon. When shares are held by joint
tenants, both should sign. When
signing as attorney or as executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by president or other
authorized officer. If a partnership,
please sign in partnership name by
authorized persons.
Dated: ----------------------- , 1998
X -----------------------------------
Signature
PLEASE MARK BOXES /X/ OR [X] IN BLUE OR BLACK INK. SIGN, DATE AND RETURN THE X -----------------------------------
PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. Signature, if held jointly
STATEMENT OF ADDITIONAL INFORMATION
MERRILL LYNCH FUND FOR TOMORROW, INC.
MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.
P.O. BOX 9011
PRINCETON, NEW JERSEY 08543-9011
(609) 282-2800
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Proxy Statement and Prospectus of Merrill Lynch
Fund For Tomorrow, Inc. ("Fund For Tomorrow") and Merrill Lynch Fundamental
Growth Fund, Inc. ("Fundamental Growth Fund") dated September 8, 1998 (the
"Proxy Statement and Prospectus"), which has been filed with the Securities and
Exchange Commission and can be obtained, without charge, by calling Fundamental
Growth Fund at 1-800-456-4587, ext. 123, or by writing to Fundamental Growth
Fund at the above address. This Statement of Additional Information has been
incorporated by reference into the Proxy Statement and Prospectus.
Further information about Fundamental Growth Fund is contained in and
incorporated by reference to its Prospectus, dated November 26, 1997, and its
Statement of Additional Information, dated November 26, 1997, which are
incorporated by reference into this Statement of Additional Information.
Fundamental Growth Fund's Statement of Additional Information accompanies this
Statement of Additional Information.
Further information about Fund For Tomorrow is contained in and
incorporated by reference to its Prospectus, dated April 30, 1998, and its
Statement of Additional Information, dated April 30, 1998, which are
incorporated by reference into this Statement of Additional Information. Fund
For Tomorrow's Statement of Additional Information accompanies this Statement
of Additional Information.
The Commission maintains a web site (http://www.sec.gov) that contains the
prospectus and statement of additional information of each of Fund For Tomorrow
and Fundamental Growth Fund, other material incorporated by reference and other
information regarding Fund For Tomorrow and Fundamental Growth Fund.
TABLE OF CONTENTS
General Information ...................................................................... 2
Financial Statements ..................................................................... 2
Pro Forma Combined Schedule of Investments for Fundamental Growth Fund and Fund For
Tomorrow as of
June 30, 1998 (unaudited) ............................................................... F-1
Pro Forma Combined Statement of Assets and Liabilities for Fundamental Growth Fund and
Fund For Tomorrow
as of June 30, 1998 (unaudited) ......................................................... F-8
Pro Forma Combined Statement of Operations for Fundamental Growth Fund and Fund For
Tomorrow for the
five months ended June 30, 1998 (unaudited) ............................................. F-10
The date of this Statement of Additional Information is September 8, 1998.
GENERAL INFORMATION
The stockholders of Fund For Tomorrow are being asked to approve the
acquisition of substantially all of the assets of Fund For Tomorrow, and the
assumption of substantially all of the liabilities of Fund For Tomorrow by
Fundamental Growth Fund in exchange solely for an equal aggregate value of
shares of Fundamental Growth Fund (the "Reorganization"). Fundamental Growth
Fund is an open-end management investment company organized as a Maryland
corporation. A Special Meeting of Stockholders of Fund For Tomorrow to consider
the Reorganization will be held at 800 Scudders Mill Road, Plainsboro, New
Jersey, on October 13, 1998, at 9:00 a.m., New York time.
For detailed information about the Reorganization, stockholders of Fund
For Tomorrow should refer to the Proxy Statement and Prospectus. For further
information about Fundamental Growth Fund, Fund For Tomorrow stockholders
should refer to Fundamental Growth Fund's Statement of Additional Information,
dated November 24, 1997, which accompanies this Statement of Additional
Information and is incorporated by reference herein. For further information
about Fund For Tomorrow, stockholders should refer to Fund For Tomorrow's
Statement of Additional Information, dated April 30, 1998, which accompanies
this Statement of Additional Information and is incorporated by reference
herein.
FINANCIAL STATEMENTS
Pro forma financial statements reflecting consummation of the
Reorganization are included herein.
FUNDAMENTAL GROWTH FUND
Audited financial statements and accompanying notes for the fiscal year
ended August 31, 1997 and the independent auditor's report thereon, dated
October 3, 1997 of Fundamental Growth Fund are incorporated by reference from
Fundamental Growth Fund's Statement of Additional Information, dated November
26, 1997. Unaudited financial statements and accompanying notes for the six
months ended February 28, 1998 for Fundamental Growth Fund are incorporated by
reference from Fundamental Growth Fund's Semi-Annual Report to Shareholders.
FUND FOR TOMORROW
Audited financial statements and accompanying notes for the fiscal year
ended January 31, 1998, and the independent auditor's report thereon, dated
March 10, 1998, of Fund For Tomorrow are incorporated by reference from the
Fund For Tomorrow Statement of Additional Information dated April 30, 1998.
2
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS FOR
MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC. AND
MERRILL LYNCH FUND FOR TOMORROW, INC.
JUNE 30, 1998 (UNAUDITED)
FUNDAMENTAL FUND FOR PRO FORMA FOR
INDUSTRIES SHARES HELD STOCKS GROWTH+ TOMORROW+ COMBINED FUND+
- -------------------------------- ------------- ------------------------------------------ ------------- ------------- --------------
ADVERTISING 132,000 Interpublic Group of Companies, Inc. $ 8,010,750 -- $ 8,010,750
BANKING & FINANCIAL 302,500 Banc One Corp. 16,883,281 -- 16,883,281
82,500 BankAmerica Corp. 7,131,094 -- 7,131,094
44,000 Citicorp 6,567,000 -- 6,567,000
220,000 Mellon Bank Corp. 15,317,500 -- 15,317,500
170,500 State Street Boston Corp. 11,849,750 -- 11,849,750
----------- -----------
57,748,625 57,748,625
BEVERAGES 295,000 Coca-Cola Company (The) 25,222,500 -- 25,222,500
66,000 Seagram Co., Ltd. (The) 2,701,875 -- 2,701,875
----------- -----------
27,924,375 27,924,375
BROADCASTING-RADIO & TELEVISION 220,000 Chancellor Media Corp. 10,917,500 -- 10,917,500
132,000 Clear Channel Communications, Inc. 14,404,500 -- 14,404,500
----------- -----------
25,322,000 25,322,000
BROADCAST SERVICES 200,000 Carlton Communications PLC (ADR)(a) -- $ 9,000,000 9,000,000
BUILDING MATERIALS 100,000 Royal Group Technologies Ltd. -- 2,891,747 2,891,747
CABLE TELEVISION 150,000 Tele-Communications Liberty Media Group -- 5,821,875 5,821,875
CHEMICALS (Series A)
COMMUNICATION EQUIPMENT 165,000 duPont (E.I.) de Nemours & Co. 12,313,125 -- 12,313,125
363,000 Cisco Systems, Inc. 33,418,688 -- 33,418,688
440,000 FORE Systems, Inc. 11,632,500 -- 11,632,500
170,500 Lucent Technologies, Inc. 14,183,469 -- 14,183,469
220,000 Newbridge Networks Corporation 5,266,250 -- 5,266,250
71,500 Northern Telecom Ltd. 4,057,625 -- 4,057,625
176,000 Telefonakliebolaget LM Ericsson (ADR)(a) 5,038,000 -- 5,038,000
COMPONENTS ----------- -----------
73,596,532 73,596,532
150,000 Harman International Industries Inc. -- 5,775,000 5,775,000
200,000 Nokia Corp. AB (ADR)(a) -- 14,512,500 14,512,500
150,000 Voice Control Systems Inc. -- 487,500 487,500
----------- -----------
20,775,000 20,775,000
F-1
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS
MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC. AND
MERRILL LYNCH FUND FOR TOMORROW, INC.
JUNE 30, 1998 (UNAUDITED) (CONTINUED)
FUNDAMENTAL FUND FOR PRO FORMA FOR
INDUSTRIES SHARES HELD STOCKS GROWTH+ TOMORROW+ COMBINED FUND+
- -------------------------- ------------- -------------------------------------------- ------------- -------------- ---------------
COMPUTERS 1,368,000 COMPAQ Computer Corp. $27,467,000 $11,350,000 $38,817,000
148,500 Dell Computer Corporation 13,773,375 -- 13,773,375
110,000 Hewlett-Packard Co. 6,586,250 -- 6,586,250
----------- ----------- -----------
47,826,625 11,350,000 59,176,625
CONGLOMERATE 200,000 Quinenco S.A. (ADR)(a) -- 1,800,000 1,800,000
COSMETICS 124,400 Avon Products, Inc. -- 9,641,000 9,641,000
242,000 Gilette Company (The) 13,718,375 -- 13,718,375
22,000 International Flavors & Fragrances Inc. 955,625 -- 955,625
----------- ----------- -----------
14,674,000 9,641,000 24,315,000
ELECTRICAL EQUIPMENT 33,000 Emerson Electric Co. 1,992,375 -- 1,992,375
470,760 General Electric Co. 36,036,000 6,803,160 42,839,160
11,000 Honeywell, Inc. 919,188 -- 919,188
----------- ----------- -----------
38,947,563 6,803,160 45,750,723
ELECTRONICS 302,500 Intel Corp. 22,403,906 -- 22,403,906
100,000 Phillips Electronics N.V. (NY Registered -- 8,500,000 8,500,000
Shares)
50,000 Sony Corp. (ADR)(a) -- 4,303,125 4,303,125
110,000 ST Microelectronics (NY Registered Shares) 7,686,250 -- 7,686,250
302,500 Texas Instruments Inc. 17,639,531 -- 17,639,531
----------- ----------- -----------
47,729,687 12,803,125 60,532,812
ENERGY 176,000 El Paso Natural Gas Co. 6,732,000 -- 6,732,000
82,500 Enron Corp. 4,460,156 -- 4,460,156
----------- -----------
11,192,156 11,192,156
ENTERTAINMENT 110,000 Viacom, Inc. (Class A) 6,435,000 -- 6,435,000
220,000 Walt Disney Company (The) 23,113,750 -- 23,113,750
----------- -----------
29,548,750 29,548,750
ENVIRONMENTAL EQUIPMENT 118,900 Thermo Ecotex Corp. -- 1,857,812 1,857,812
F-2
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS FOR
MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC. AND
MERRILL LYNCH FUND FOR TOMORROW, INC.
JUNE 30, 1998 (UNAUDITED) (CONTINUED)
FUNDAMENTAL FUND FOR PRO FORMA FOR
INDUSTRIES SHARES HELD STOCKS GROWTH+ TOMORROW+ COMBINED FUND+
- ------------------------- ------------- --------------------------------------------- ------------- ------------- ---------------
FINANCIAL SERVICES 38,500 American Express Company $ 4,389,000 -- $ 4,389,000
104,500 Federal National Mortgage Assocation 6,348,375 -- 6,348,375
165,000 Franklin Resources, Inc. 8,910,000 -- 8,910,000
198,000 Morgan Stanley, Dean Witter, Discover & Co. 18,092,250 -- 18,092,250
132,000 Travelers Group, Inc. 8,002,500 -- 8,002,500
----------- -----------
45,742,125 45,742,125
FOOD 33,000 ConAgra, Inc. 1,045,688 -- 1,045,688
55,000 Wrigley (Wm.) Jr. Co. (Class B) 5,390,000 -- 5,390,000
----------- -----------
6,435,688 6,435,688
FOOD & BEVERAGE 954,900,000 Avipal S.A. -- Avicultura e Agropecuaria -- $1,519,253 1,519,253
160,000 PepsiCo, Inc. -- 6,590,000 6,590,000
---------- -----------
8,109,253 8,109,253
FOOD MERCHANDISING 55,000 Albertson's, Inc. 2,849,688 -- 2,849,688
165,000 Meyer (Fred), Inc. 7,012,500 -- 7,012,500
----------- -----------
9,862,188 9,862,188
HEALTHCARE 200,000 HEALTHSOUTH Corp. -- 5,337,500 5,337,500
HOME FURNISHINGS 291,500 Ethan Allen Interiors, Inc. 14,556,781 -- 14,556,781
50,000 American Woodmark Corporation -- 1,368,750 1,368,750
----------- ---------- -----------
14,556,781 1,368,750 15,925,531
HOTEL 132,000 Marriott International, Inc. 4,273,500 -- 4,273,500
HOUSEHOLD PRODUCTS 38,500 Colgate-Palmolive Co. 3,388,000 -- 3,388,000
88,000 Kimberly-Clark Corporation 4,037,000 -- 4,037,000
297,000 Procter & Gamble Co. 27,045,563 -- 27,045,563
220,000 Unilever N.V. (NY Registered Shares) 17,366,250 -- 17,366,250
----------- -----------
51,836,813 51,836,813
INFORMATION PROCESSING 396,000 First Data Corp. 13,191,750 -- 13,191,750
F-3
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS FOR
MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC. AND
MERRILL LYNCH FUND FOR TOMORROW, INC.
JUNE 30, 1998 (UNAUDITED) (CONTINUED)
FUNDAMENTAL FUND FOR PRO FORMA FOR
INDUSTRIES SHARES HELD STOCKS GROWTH+ TOMORROW+ COMBINED FUND+
- -------------------------- ------------- -------------------------------------------- ------------- ------------- ---------------
INFORMATION SERVICES 50,000 Ceridian Corp. -- $ 2,937,500 $ 2,937,500
400,000 OzEmail, Ltd. (ADR)(a) -- 9,050,000 9,050,000
----------- -----------
11,987,500 11,987,500
INFORMATION SYSTEMS 100,000 International Business Machines Corp. -- 11,481,250 11,481,250
INSURANCE 11,000 Aetna Inc. $ 837,375 -- 837,375
121,000 American International Group, Inc. 17,666,000 -- 17,666,000
50,000 Chubb Corp. -- 4,018,750 4,018,750
200,000 Torchmark Corp. -- 9,150,000 9,150,000
----------- ----------- -----------
18,503,375 13,168,750 31,672,125
INTERNET SOFTWARE 55,000 America Online, Inc. 5,830,000 -- 5,830,000
LEISURE 230,000 Polygram N.V. (NY Registered Shares) 11,701,250 -- 11,701,250
LEISURE & ENTERTAINMENT 300,000 Galoob (Lewis) Toys, Inc. -- 3,000,000 3,000,000
100,000 Royal Olympic Cruise Lines, Inc. -- 1,000,000 1,000,000
----------- -----------
4,000,000 4,000,000
MEDICAL SERVICES 100,000 Vencor, Inc. -- 725,000 725,000
MEDICAL-TECHNOLOGY 137,500 Boston Scientific Corp. 9,848,438 -- 9,848,438
132,000 Guidant Corp. 9,413,250 -- 9,413,250
22,000 Johnson & Johnson 1,622,500 -- 1,622,500
----------- -----------
20,884,188 20,884,188
MISCELLANEOUS 7,888 Coram Healthcare Corporation (Warrants)(b) -- -- --
MULTI-INDUSTRY 180,000 Thermo Electron Corp. -- 6,153,750 6,153,750
OIL SERVICES 148,500 Baker Hughes, Inc. 5,132,531 -- 5,132,531
88,000 Diamond Offshore Drilling, Inc. 3,520,000 -- 3,520,000
55,000 Schlumberger Ltd. 3,757,187 -- 3,757,187
----------- -----------
12,409,718 12,409,718
PERSONAL COMPUTERS 100,000 Gateway 2000, Inc. -- 5,062,500 5,062,500
F-4
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS FOR
MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC. AND
MERRILL LYNCH FUND FOR TOMORROW, INC.
JUNE 30, 1998 (UNAUDITED) (CONTINUED)
FUNDAMENTAL FUND FOR PRO FORMA FOR
INDUSTRIES SHARES HELD STOCKS GROWTH+ TOMORROW+ COMBINED FUND+
- -------------------------------- ------------- ---------------------------------------- ------------- -------------- --------------
PHARMACEUTICALS 200,000 American Home Products Corp. -- $10,350,000 $ 10,350,000
33,000 Amgen, Inc. $ 2,157,375 -- 2,157,375
133,333 Astra AB (ADR)(a) -- 2,733,327 2,733,327
320,000 Bristol-Myers Squibb Co. 25,286,250 11,493,750 36,780,000
100,000 Lilly (Eli) and Company -- 6,606,250 6,606,250
199,400 Merck & Co. Inc. 19,861,875 6,807,875 26,669,750
50,000 Novartis AG (ADR)(a) -- 4,150,000 4,150,000
286,000 Pfizer, Inc. 31,084,625 -- 31,084,625
100,800 Schering-Plough Corp. -- 9,235,800 9,235,800
----------- ----------- ------------
PHOTOGRAPHY 27,500 Eastman Kodak Co. 78,390,125 51,377,002 129,767,127
POLLUTION CONTROL 22,000 Waste Management Inc. 2,009,219 -- 2,009,219
POLLUTION TECHNOLOGY 400,000 Molten Metal Technology, Inc. 770,000 -- 770,000
396,600 Philip Services Corp. -- 40,000 40,000
-- 1,635,975 1,635,975
----------- ------------
1,675,975 1,675,975
PUBLISHING 44,000 Gannett Co., Inc. 3,126,750 -- 3,126,750
REAL ESTATE DEVELOPMENT 100,000 Ventas, Inc. -- 1,381,250 1,381,250
RESTAURANT 44,000 McDonald's Corp. 3,036,000 -- 3,036,000
RETAIL APPAREL 40,000 The Children's Place Retail Stores, Inc. -- 390,000 390,000
RETAIL SPECIALTY 357,000 CVS Corporation 13,900,688 -- 13,900,688
187,000 Gap, Inc. (The) 11,523,875 -- 11,523,875
75,000 Petco Animal Supplies, Inc. -- 1,495,312 1,495,312
770,000 Staples Inc. 22,281,875 -- 22,281,875
341,000 Walgreen Co. 14,087,562 -- 14,087,562
----------- ----------- ------------
61,794,000 1,495,312 63,289,312
RETAIL STORES 704,000 Wal-Mart Stores, Inc. 42,768,000 -- 42,768,000
236,500 Federated Department Stores, Inc. 12,726,656 -- 12,726,656
----------- ------------
55,494,656 55,494,656
SEMICONDUCTOR CAPITAL EQUIPMENT 352,000 Applied Materials, Inc. 10,384,000 -- 10,384,000
F-5
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS FOR
MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC. AND
MERRILL LYNCH FUND FOR TOMORROW, INC.
JUNE 30, 1998 (UNAUDITED) (CONTINUED)
FUNDAMENTAL FUND FOR PRO FORMA FOR
INDUSTRIES SHARES HELD STOCKS GROWTH+ TOMORROW+ COMBINED FUND+
- ----------------------- ------------- --------------------------------------------- ------------- ------------- ---------------
SOFTWARE -- COMPUTER 115,500 Baan Company, N.V. (U.S. Registered Shares) $ 4,114,687 -- $ 4,114,687
302,500 Microsoft Corp. 32,783,437 -- 32,783,437
440,000 PeopleSoft, Inc. 20,652,500 -- 20,652,500
165,000 SAP AG (Systeme, Anwendugen, Produkte in 37,288,845 -- 37,288,845
der Datenverarbeitung)(ADR)(a)
50,000 Sterling Commerce, Inc. -- $ 2,425,000 2,425,000
----------- ----------- -----------
94,839,469 2,425,000 97,264,469
SPECIALTY RETAIL 138,900 OfficeMax, Inc. -- 2,291,850 2,291,850
SPECIALTY SERVICES 200,000 Household International, Inc. -- 9,950,000 9,950,000
1,000,000 National Mutual Asia Ltd. -- 638,866 638,866
250,000 Sitel Corporation -- 1,656,250 1,656,250
----------- -----------
12,245,116 12,245,116
SYSTEMS 100,000 Computer Sciences Corporation -- 6,400,000 6,400,000
100,000 Genrad, Inc. -- 1,975,000 1,975,000
75,000 Networks Associates, Inc. -- 3,585,937 3,585,937
300,000 Silicon Graphics, Inc. -- 3,637,500 3,637,500
200,000 Sun Microsystems, Inc. -- 8,687,500 8,687,500
----------- -----------
24,285,937 24,285,937
TELECOMMUNICATIONS 100,000 ADC Telecommunications, Inc. -- 3,650,000 3,650,000
352,000 AT&T Corporation 20,108,000 -- 20,108,000
200,000 Alcatel Alsthom Cie Generale d'Electricite -- 8,137,500 8,137,500
S.A. (ADR)(a)
300,000 Inter-Tel Inc. -- 4,800,000 4,800,000
100,000 RSL Communications, Ltd. (Class A) -- 2,975,000 2,975,000
385,000 Sprint Corporation 27,142,500 -- 27,142,500
242,000 WorldCom, Inc. 11,691,625 -- 11,691,625
----------- ----------- -----------
58,942,125 19,562,500 78,504,625
F-6
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS FOR
MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC. AND
MERRILL LYNCH FUND FOR TOMORROW, INC.
JUNE 30, 1998 (UNAUDITED) (CONCLUDED)
FUNDAMENTAL FUND FOR PRO FORMA FOR
INDUSTRIES SHARES HELD STOCKS GROWTH+ TOMORROW+ COMBINED FUND+
- ------------------- -------------- ------------------------------------------ ----------------- --------------- -----------------
100,000 Shaw Industries, Inc. -- $ 1,762,500 $ 1,762,500
TEXTILES
TOYS 275,000 Mattel, Inc. $ 11,635,937 -- 11,635,937
TRAVEL & LODGING 330,000 Carnival Corporation (Class A) 13,076,250 -- 13,076,250
-------------- ------------ --------------
TOTAL STOCKS 1,003,560,095 269,030,414 1,272,590,509
------------- ----------- -------------
FACE AMOUNT SHORT-TERM SECURITIES
---------- ------------------------------------------
COMMERCIAL PAPER* $ 10,000,000 Atlantic Asset Security Corp., 5.62% due -- 9,970,339 9,970,339
7/20/1998
12,673,000 CIT Group Holdings Corp., 6.50% -- 12,673,000 12,673,000
due 7/01/1998
25,000,000 Corporate Asset Funding Corp., 5.55% 24,976,875 -- 24,976,875
due 7/07/1998
10,000,000 Countrywide Home Loan Corp., 5.54% 9,990,767 -- 9,990,767
due 7/07/1998
8,044,000 General Motors Acceptance Corp., 6.50% 8,044,000 -- 8,044,000
due 7/01/1998
7,000,000 International Securitization, 5.57% -- 6,979,422 6,979,422
due 7/20/1998
15,000,000 Lexington Parker Capital Co. LLC, 5.60% 14,962,667 -- 14,962,667
due 7/17/1998
11,433,000 Variable Funding Capital Corp., 5.58% 11,408,190 -- 11,408,190
due 7/15/1998
14,000,000 Variable Funding Capital Corp., 5.57% 3,988,241 9,970,603 13,958,844
-------------- ------------ --------------
due 7/20/1998
TOTAL SHORT-TERM SECURITIES 73,370,740 39,593,364 112,964,104
-------------- ------------ --------------
TOTAL INVESTMENTS (COST $1,076,930,835 $308,623,778 $1,385,554,613
============== ============ ==============
$1,125,656,160)
- -------
+ Value as discussed in Note 1a of Notes to Pro Forma Financial Statements.
* Commercial Paper is traded on a discount basis, the interest rates shown are
the discount rates paid at the time of purchase by the Fund.
(a) American Depositary Receipts.
(b) Warrants entitle the Fund to purchase a predetermined number of shares of
common stock. The purchase price and number of shares are subject to
adjustment under certain conditions until the expiration date and are
non-income producing.
F-7
PRO FORMA COMBINED STATEMENT OF ASSETS AND LIABILITIES FOR
MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC. AND
MERRILL LYNCH FUND FOR TOMORROW, INC.
(UNAUDITED)
The following unaudited Pro Forma Combined Statement of Assets and
Liabilities for Merrill Lynch Fundamental Growth Fund, Inc. ("Fundamental
Growth Fund") and Merrill Lynch Fund For Tomorrow, Inc. ("Fund For Tomorrow")
has been derived from the Statements of Assets and Liabilities of Fundamental
Growth Fund and Fund For Tomorrow as of June 30, 1998, and such information has
been adjusted to give effect to the Reorganization as if the Reorganization had
occurred on June 30, 1998. The Pro Forma Statement of Assets and Liabilities is
presented for informational purposes only and does not purport to be indicative
of the financial condition that would have resulted if the Reorganization had
been consummated on June 30, 1998. The Pro Forma Combined Statement of Assets
and Liabilities should be read in conjunction with the financial statements and
related notes from the audited financial statements of Fundamental Growth Fund
included in its Statement of Additional Information dated November 26, 1997 and
from the Fund For Tomorrow audited financial statements and related notes
included in its Statement of Additional Information dated April 30, 1998.
FUNDAMENTAL FUND FOR PRO FORMA FOR
GROWTH FUND TOMORROW ADJUSTMENTS COMBINED FUND
----------------- --------------- -------------------- ----------------
ASSETS:
Investments, at value*(Note 1a) .......................... $1,076,930,835 $308,623,778 $1,385,554,613
Cash ..................................................... 507,407 12,137 519,544
Foreign Cash (Note 1b) ................................... -- 10,502 10,502
Receivables:
Capital shares sold ..................................... 10,229,919 283,864 10,513,783
Securities sold ......................................... 2,839,000 15,806,020 18,645,020
Dividends ............................................... 714,365 1,428,206 2,142,571
Deferred organization expenses (Note 1f) ................. 5,077 -- 5,077
Prepaid registration fees and other assets (Note 1f) ..... 53,503 10,264 63,767
-------------- ------------ --------------
Total assets ............................................. 1,091,280,106 326,174,771 1,417,454,877
-------------- ------------ --------------
LIABILITIES:
Payables:
Dividends to Shareholders ............................... -- -- $ 58,825,628(1) 58,825,628
Securities purchased .................................... 24,462,322 13,883,212 38,345,534
Capital shares redeemed ................................. 3,865,802 241,208 4,107,010
Distributor (Note 2) .................................... 633,761 92,467 726,228
Investment adviser (Note 2) ............................. 547,034 178,808 725,842
Accrued expenses and other liabilities ................... 204,377 167,173 295,072(2) 666,622
-------------- ------------ -------------- --------------
Total liabilities ........................................ 29,713,296 14,562,868 59,120,700 103,396,864
-------------- ------------ ------------ --------------
NET ASSETS:
Net Assets: .............................................. $1,061,566,810 $311,611,903 ($ 59,120,700) $1,314,058,013
============== ============ ============== ==============
NET ASSETS CONSIST OF:
Class A Common Stock, $0.10 par value,
100,000,000 shares authorized ........................... $ 897,094 $ 61,291 $ (6,742) $ 951,643
Class B Common Stock, $0.10 par value,
100,000,000 shares authorized ........................... 3,294,957 295,158 (30,873) 3,559,242
Class C Common Stock, $0.10 par value,
100,000,000 share authorized ............................ 737,527 10,585 (1,195) 746,917
Class D Common Stock, $0.10 par value,
100,000,000 shares authorized ........................... 775,514 1,420,195 (154,202) 2,041,507
Paid-in capital in excess of par ......................... 851,888,026 195,074,312 (102,060) 1,046,860,278
Accumulated investment income (loss) -- net .............. (1,430,721) 1,555,413 (124,692) 0
Undistributed realized capital gains on investments
and foreign currency transactions -- net ................ 40,331,874 18,369,062 (58,700,936) 0
Unrealized appreciation on investments and foreign
currency transactions -- net ............................ 165,072,539 94,825,887 259,898,426
-------------- ------------ -------------- --------------
Net assets ............................................... $1,061,566,810 $311,611,903 ($ 59,120,700) $1,314,058,013
============== ============ ============== ==============
F-8
PRO FORMA COMBINED STATEMENT OF ASSETS AND LIABILITIES FOR
MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC. AND
MERRILL LYNCH FUND FOR TOMORROW, INC.
(UNAUDITED) (CONCLUDED)
FUNDAMENTAL FUND FOR PRO FORMA FOR
GROWTH FUND TOMORROW ADJUSTMENTS COMBINED FUND
----------------- ---------------- ---------------- -----------------
NET ASSET VALUE:
Class A:
Net assets ................. $ 172,885,564 $ 10,819,194 ($ 7,066,653) $ 176,638,105
Shares outstanding ......... 8,970,935 612,910 (67,413) 9,516,432
Net asset value ............ $ 19.27 $ 17.65 $ 18.56
Class B:
Net assets ................. $ 604,496,007 $ 49,899,908 ($ 25,482,997) $ 628,912,918
Shares outstanding ......... 32,949,565 2,951,579 (308,723) 35,592,421
Net asset value ............ $ 18.35 $ 16.91 $ 17.67
Class C:
Net assets ................. $ 135,909,704 $ 1,780,876 ($ 5,123,872) $ 132,566,708
Shares outstanding ......... 7,375,265 105,848 (11,945) 7,469,168
Net asset value ............ $ 18.43 $ 16.82 $ 17.75
Class D:
Net assets ................. $ 148,275,535 $249,111,925 ($ 21,447,178) $ 375,940,282
Shares outstanding ......... 7,755,139 14,201,953 (1,542,020) 20,415,072
Net asset value ............ $ 19.12 $ 17.54 $ 18.41
*IDENTIFIED COST ............ $ 911,858,296 $213,797,864 $1,125,656,160
- ---------
(1) Reflects the payment of undistributed net investment income and
undistributed realized capital gains.
(2) Reflects the charge of estimated Reorganization expenses of $350,000 and
anticipated savings of the Reorganization.
See Notes to Financial Statements.
F-9
PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR
MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC. AND
MERRILL LYNCH FUND FOR TOMORROW, INC.
(UNAUDITED)
The following unaudited Pro Forma Combined Statement of Operations for
Fundamental Growth Fund and Fund For Tomorrow has been derived from the
Statements of Operations of Fundamental Growth Fund and Fund For Tomorrow for
the five months ended June 30, 1998, and such information has been adjusted to
give effect to the Reorganization as if the Reorganization had occurred on
February 1, 1998. The Pro Forma Statement of Operations is presented for
informational purposes only and does not purport to be indicative of the
financial condition that would have resulted if the Reorganization had been
consummated on February 1, 1998. The Pro Forma Combined Statement of Operations
should be read in conjunction with the financial statements and related notes
from the audited financial statements of Fundamental Growth Fund included in
its Statement of Additional Information dated November 26, 1997 and from the
Fund For Tomorrow audited financial statements and related notes included in
its Statement of Additional Information dated April 30, 1998.
FUNDAMENTAL FUND FOR
GROWTH FUND TOMORROW
--------------- --------------
INVESTMENT INCOME (NOTES 1D & 1A):
Dividends** ....................................................... $ 2,528,384 $ 2,791,920
Interest and discount earned ...................................... 1,955,001 523,182
------------ -----------
Total income ...................................................... 4,483,385 3,315,102
------------ -----------
EXPENSES:
Investment advisory fees .......................................... 2,143,881 853,232
Account maintenance and distribution fees -- Class B (Note 2) ..... 1,877,715 229,598
Account maintenance and distribution fees -- Class C (Note 2) ..... 471,722 9,878
Transfer agent fees -- Class B .................................... 201,576 46,990
Registration fees (Note 1f) ....................................... 168,109 32,968
Account maintenance fees -- Class D (Note 2) ...................... 109,440 255,676
Custodian fees .................................................... 16,821 21,276
Transfer agent fees -- Class C .................................... 52,078 2,153
Transfer agent fees -- Class D .................................... 38,132 166,433
Printing and shareholder reports .................................. 43,000 44,267
Accounting services (Note 2) ...................................... 33,022 33,558
Directors' fees and expenses ...................................... 11,440 11,440
Transfer agent fees -- Class A (Note 2) ........................... 39,011 8,375
Professional fees ................................................. 20,912 31,420
Amortization of organization expenses ............................. 1,053 --
Pricing fees ...................................................... 7 513
Other ............................................................. 4,652 7,929
------------ -----------
Total expenses .................................................... 5,232,571 1,755,706
------------ -----------
Investment income (loss) -- net ................................... (749,186) 1,559,396
------------ -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS & FOREIGN
CURRENCY TRANSACTIONS -- NET (NOTES 1B, 1C, 1E & 3):
Realized gain (loss) from:
Investments -- net ............................................... 32,417,078 15,435,072
Foreign currency transactions -- net ............................. -- (4,347)
Change in unrealized appreciation/depreciation on:
Investments -- net ............................................... 100,831,744 22,245,210
Foreign currency transactions -- net ............................. -- (18)
------------ -----------
Net realized and unrealized gain on investments and foreign
currency transactions ............................................ 133,248,822 37,675,917
------------ -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .............. $132,499,636 $39,235,313
============ ===========
**Net foreign withholding tax on dividends ......................... -- $ 144,463
PRO FORMA FOR
ADJUSTMENTS COMBINED FUND
------------------ ----------------
INVESTMENT INCOME (NOTES 1D & 1A):
Dividends** ....................................................... $ 5,320,304
Interest and discount earned ...................................... 2,478,183
------------
Total income ...................................................... 7,798,487
------------
EXPENSES:
Investment advisory fees .......................................... 2,997,113
Account maintenance and distribution fees -- Class B (Note 2) ..... 2,107,313
Account maintenance and distribution fees -- Class C (Note 2) ..... 481,600
Transfer agent fees -- Class B .................................... 248,566
Registration fees (Note 1f) ....................................... 201,077
Account maintenance fees -- Class D (Note 2) ...................... 365,116
Custodian fees .................................................... 38,097
Transfer agent fees -- Class C .................................... 54,231
Transfer agent fees -- Class D .................................... 204,565
Printing and shareholder reports .................................. 87,267
Accounting services (Note 2) ...................................... (27,464)(2) 39,116
Directors' fees and expenses ...................................... (13,732)(2) 9,148
Transfer agent fees -- Class A (Note 2) ........................... 47,386
Professional fees ................................................. (13,732)(2) 38,600
Amortization of organization expenses ............................. 1,053
Pricing fees ...................................................... 520
Other ............................................................. 350,000(1) 362,581
--------- ------------
Total expenses .................................................... 295,072 7,283,349
--------- ------------
Investment income (loss) -- net ................................... (295,072) 515,138
---------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS & FOREIGN
CURRENCY TRANSACTIONS -- NET (NOTES 1B, 1C, 1E & 3):
Realized gain (loss) from:
Investments -- net ............................................... 47,852,150
Foreign currency transactions -- net ............................. (4,347)
Change in unrealized appreciation/depreciation on:
Investments -- net ............................................... 123,076,954
Foreign currency transactions -- net ............................. (18)
------------
Net realized and unrealized gain on investments and foreign
currency transactions ............................................ 170,924,739
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .............. ($ 295,072) $171,439,877
============ ============
**Net foreign withholding tax on dividends ......................... $ 144,463
- ---------
(1) Reflects the charge for estimated Reorganization expenses of $350,000.
(2) Reflects the anticipated savings of the Reorganization.
F-10
MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC. AND
MERRILL LYNCH FUND FOR TOMORROW, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES:
Merrill Lynch Fundamental Growth Fund, Inc. (the "Fund") is registered
under the Investment Company Act of 1940 as a diversified, open-end management
investment company. These unaudited financial statements reflect all adjustments
which are, in the opinion of management, necessary to a fair statement of the
results for the interim period presented. The Fund offers four classes of shares
under the Merrill Lynch Select Pricing(SM) System. Shares of Class A and Class D
are sold with a front-end sales charge. Shares of Class B and Class C may be
subject to a contingent deferred sales charge. All classes of shares have
identical voting, dividend, liquidation and other rights and the same terms and
conditions, except that Class B, Class C and Class D Shares bear certain
expenses related to the account maintenance of such shares, and Class B and
Class C Shares also bear certain expenses related to the distribution of such
shares. Each class has exclusive voting rights with respect to matters relating
to its account maintenance and distribution expenditures. The following is a
summary of significant accounting policies followed by the Fund.
(A) VALUATION OF INVESTMENTS -- Portfolio securities which are traded on
stock exchanges are valued at the last sale price on the exchange on which such
securities are traded, as of the close of business on the day the securities
are being valued or, lacking any sales, at the last available bid price.
Securities traded in the over-the-counter market are valued at the last
available bid price prior to the time of valuation. In cases where securities
are traded on more than one exchange, the securities are valued on the exchange
designated by or under the authority of the Board of Directors as the primary
market. Securities which are traded both in the over-the-counter market and on
a stock exchange are valued according to the broadest and most representative
market. Options written are valued at the last sale price in the case of
exchange-traded options or, in the case of options traded in the
over-the-counter market, the last asked price. Options purchased are valued at
the last sale price in the case of exchange-traded options or, in the case of
options traded in the over-the-counter market, the last bid price. Short-term
securities are valued at amortized cost, which approximates market value. Other
investments, including futures contracts and related options, are stated at
market value. Securities and assets for which market value quotations are not
available are valued at their fair value as determined in good faith by or
under the direction of the Fund's Board of Directors.
(B) DERIVATIVE FINANCIAL INSTRUMENTS -- The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its portfolio
against adverse movements in the equity, debt and currency markets. Losses may
arise due to changes in the value of the contract or if the counterparty does
not perform under the contract.
o FINANCIAL FUTURES CONTRACTS -- The Fund may purchase or sell financial
futures contracts and options on such futures contracts for the purpose of
hedging the market risk on existing securities or the intended purchase of
securities. Futures contracts are contracts for delayed delivery of
securities at a specific future date and at a specific price or yield.
Upon entering into a contract, the Fund deposits and maintains as
collateral such initial margin as required by the exchange on which the
transaction is effected. Pursuant to the contract, the Fund agrees to
receive from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known
as variation margin and are recorded by the Fund as unrealized gains or
losses. When the contract is closed, the Fund records a realized gain or
loss equal to the difference between the value of the contract at the time
it was opened and the value at the time it was closed.
o OPTIONS -- The Fund is authorized to write and purchase call and put
options. When the Fund writes an option, an amount equal to the premium
received by the Fund is reflected as an asset and an equivalent liability.
The amount of the liability is subsequently marked to market to reflect
the current value of the option written. When a security is purchased or
sold through an exercise of an option, the related premium paid (or
received) is added to (or deducted from) the basis of the security
acquired or deducted from (or added to) the proceeds of the security sold.
When an option expires (or the Fund enters into a closing transaction),
the Fund realizes a gain or loss on the option to the extent of the
premiums received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
F-11
MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC. AND
MERRILL LYNCH FUND FOR TOMORROW, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES: -- (CONTINUED)
(C) FOREIGN CURRENCY TRANSACTIONS -- Transactions denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized. Assets
and liabilities denominated in foreign currencies are valued at the exchange
rate at the end of the period. Foreign currency transactions are the result of
settling (realized) or valuing (unrealized) assets or liabilities expressed in
foreign currencies into US dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on investments.
(D) INCOME TAXES -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no Federal income tax provision is required. Under the
applicable foreign tax law, a withholding tax may be imposed on interest,
dividends, and capital gains at various rates.
(E) SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions
are recorded on the dates the transactions are entered into (the trade dates).
Dividend income is recorded on the ex-dividend dates. Dividends from foreign
securities where the ex-dividend date may have passed are subsequently recorded
when the Fund has determined the ex-dividend date. Interest income (including
amortization of discount) is recognized on the accrual basis. Realized gains
and losses on security transactions are determined on the identified cost
basis.
(F) DEFERRED ORGANIZATION EXPENSES AND PREPAID REGISTRATION FEES --
Deferred organization expenses are charged to expense on a straight-line basis
over a period not exceeding five years. Prepaid registration fees are charged
to expense as the related shares are issued.
(G) DIVIDENDS AND DISTRIBUTIONS -- Dividends and distributions paid by the
Fund are recorded on the ex-dividend dates.
2. INVESTMENT ADVISORY AGREEMENT AND TRANSACTIONS WITH AFFILIATES:
The Fund has entered into an Investment Advisory Agreement with Merrill
Lynch Asset Management, L.P. ("MLAM"). The general partner of MLAM is Princeton
Services, Inc. ("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch &
Co., Inc. ("ML & Co."), which is the limited partner. The Fund has also entered
into a Distribution Agreement and Distribution Plans with Merrill Lynch Funds
Distributor, a division of Princeton Funds Distributor, Inc. ("MLFD" or the
"Distributor"), a wholly-owned subsidiary of Merrill Lynch Group, Inc.
MLAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain other
services necessary to the operations of the Fund. For such services, the Fund
pays a monthly fee at the annual rate of 0.65% of the average daily value of
the Fund's net assets.
Pursuant to the Distribution Plans adopted by the Fund in accordance with
Rule 12b-1 under the Investment Company Act of 1940, the Fund pays the
Distributor ongoing account maintenance and distribution fees. The fees are
accrued daily and paid monthly at annual rates based upon the average daily net
assets of the shares as follows:
ACCOUNT MAINTENANCE FEE DISTRIBUTION FEE
------------------------- -----------------
Class B .......... 0.25% 0.75%
Class C .......... 0.25% 0.75%
Class D .......... 0.25% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce,
Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co., also provides account
maintenance and distribution services to the Fund. The ongoing account
maintenance fee compensates the Distributor and MLPF&S for providing account
maintenance services to Class B, Class C and Class D shareholders. The ongoing
distribution fee compensates the Distributor and MLPF&S for providing
shareholder and distribution-related services to Class B and Class C
shareholders.
F-12
MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC. AND
MERRILL LYNCH FUND FOR TOMORROW, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED) (CONCLUDED)
2. INVESTMENT ADVISORY AGREEMENT AND TRANSACTIONS WITH
AFFILIATES: -- (CONCLUDED)
For the period February 1, 1998 to June 30, 1998, MLFD earned underwriting
discounts and direct commissions and MLPF&S earned dealer concessions on sales
of the Fund's Class A and Class D shares as follows:
MERRILL LYNCH FUNDAMENTAL MERRILL LYNCH FUND
GROWTH FUND, INC. FOR TOMORROW, INC.
--------------------------- -------------------
Class A:
MLFD ........... $ 191 $ 106
MLPF&S ......... $ 2,396 $ 494
Class D:
MLFD ........... $ 17,046 $ 540
MLPF&S ......... $ 244,378 $ 8,995
For the period February 1, 1998 to June 30, 1998, MLPF&S received
contingent deferred sales charges relating to transactions in Class B and Class
C shares, as follows:
MERRILL LYNCH FUNDAMENTAL MERRILL LYNCH FUND
GROWTH FUND, INC. FOR TOMORROW, INC.
--------------------------- -------------------
Class B ......... $ 233,187* $ 17,862*
Class C ......... $ 10,517 $ 43
- ---------
* Additional contingent deferred sales charges payable to the Distributor may
have been waived or converted to a contingent obligation in connection with
a shareholder's participation in certain fee-based programs.
In addition, MLPF&S received $38,436 in commissions on the execution of
portfolio security transactions for the Fund for the period February 1, 1998 to
June 30, 1998.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML &
Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of MLAM, PSI, FDS, MLFD, and/or ML & Co.
F-13
PART C. OTHER INFORMATION
ITEM 15. INDEMNIFICATION.
Reference is made to Article V of Registrant's Amended and Restated
Articles of Incorporation, Article VI of Registrant's By-Laws, Section 2-418 of
the Maryland General Corporation Law and Section 9 of the Class A, Class B,
Class C and Class D Distribution Agreements.
Article VI of the By-Laws provides that each officer and director of the
Registrant shall be indemnified by the Registrant to the full extent permitted
under the General Laws of the State of Maryland, except that such indemnity
shall not protect any such person against any liability to the Registrant or
any stockholder thereof to which such person would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office. Absent a court
determination that an officer or director seeking indemnification was not
liable on the merits or guilty of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office, the decision by the Registrant to indemnify such person must be based
upon the reasonable determination of independent counsel or non-party
independent directors, after review of the facts, that such officer or director
is not guilty of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
Each officer and director of the Registrant claiming indemnification
within the scope of Article VI of the By-Laws shall be entitled to advances
from the Registrant for payment of the reasonable expenses incurred by him in
connection with proceedings to which he is a party in the manner and to the
full extent permitted under the General Laws of the State of Maryland;
provided, however, that the person seeking indemnification shall provide to the
Registrant a written affirmation of his good faith belief that the standard of
conduct necessary for indemnification by the Registrant has been met and a
written undertaking to repay any such advance, if it should ultimately be
determined that the standard of conduct has not been met, and provided further
that at least one of the following additional conditions is met: (a) the person
seeking indemnification shall provide a security in form and amount acceptable
to the Registrant for his undertaking; (b) the Registrant is insured against
losses arising by reason of the advance; (c) a majority of a quorum of
non-party independent directors, or independent legal counsel in a written
opinion, shall determine, based on a review of facts readily available to the
Registrant at the time the advance is proposed to be made, that there is reason
to believe that the person seeking indemnification will ultimately be found to
be entitled to indemnification.
The Registrant may purchase insurance on behalf of an officer or director
protecting such person to the full extent permitted under the General Laws of
the State of Maryland from liability arising from his or her activities as an
officer or director of the Registrant. The Registrant, however, may not
purchase insurance on behalf of any officer or director of the Registrant that
protects or purports to protect such person from liability to the Registrant or
to its stockholders to which such officer or director would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his or her office.
The Registrant may indemnify, make advances or purchase insurance to the
extent provided in Article VI of the By-Laws on behalf of an employee or agent
who is not an officer or director of the Registrant.
In Section 9 of the Class A, Class B, Class C and Class D Distribution
Agreements relating to the securities being offered hereby, the Registrant
agrees to indemnify the Distributor and each person, if any, who controls the
Distributor within the meaning of the Securities Act of 1933 (the "1933 Act"),
against certain types of civil liabilities arising in connection with the
Registration Statement or Prospectus and Statement of Additional Information.
Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to Directors, officers and controlling persons of the Registrant
and the principal underwriter pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the 1933 Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a Director, officer,
or controlling person of the Registrant and the principal underwriter in
connection with the successful defense of any action, suit or proceeding) is
asserted by such Director, officer or controlling person or the principal
underwriter in connection with the shares being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the 1933 Act and will be governed by the final adjudication of
such issue.
C-1
ITEM 16. EXHIBITS.
1 (a) -- Articles of Incorporation of the Registrant, dated April 29, 1992.(a)
(b) -- Articles of Amendment, dated July 7, 1992, to Articles of Incorporation of Registrant. (a)
(c) -- Articles of Amendment, dated October 17, 1994, to Articles of Incorporation of Registrant. (a)
(d) -- Articles of Amendment, dated October 17, 1994, to Articles of Incorporation of Registrant. (a)
(e) -- Articles Supplementary, dated October 17, 1994, to Articles of Incorporation of Registrant. (a)
2 -- By-Laws of the Registrant.(a)
3 -- Not Applicable.
4 -- Form of Agreement and Plan of Reorganization between the Registrant and Merrill Lynch Fund For
Tomorrow, Inc. (included in Exhibit I to the Proxy Statement and Prospectus contained in this Registration
Statement)
5 -- Copies of instruments defining the rights of stockholders, including the relevant portions of the Articles of
Incorporation, and the By-Laws of the Registrant.(b)
6 (a) -- Management Agreement between Registrant and Merrill Lynch Asset Management, L.P. (a)
(b) -- Supplement to Management Agreement between Registrant and Merrill Lynch Asset Management, L.P. (c)
(c) -- Form of Sub-Advisory Agreement between Merrill Lynch Asset Management, L.P. and Merrill Lynch Asset
Management U.K. Limited. (e)
7 (a) -- Form of Class A Distribution Agreement between Registrant and Merrill Lynch Funds Distributor, Inc.
(now known as Princeton Funds Distributor, Inc.) (the "Distributor") (including Selected Dealers
Agreement). (c)
(b) -- Form of Class B Distribution Agreement between Registrant and the Distributor (including Selected
Dealers Agreement). (c)
(c) -- Form of Class C Distribution Agreement between Registrant and the Distributor (including Selected
Dealers Agreement). (c)
(d) -- Form of Class D Distribution Agreement between Registrant and the Distributor (including Selected
Dealers Agreement). (c)
8 -- None.
9 -- Custody Agreement between the Registrant and The Chase Manhattan Bank. (a)
10 (a) -- Form of Class B Distribution Plan and Class B Distribution Plan Sub-Agreement of Registrant. (c)
(b) -- Form of Class C Distribution Plan and Class C Distribution Plan Sub-Agreement of Registrant. (c)
(c) -- Form of Class D Distribution Plan and Class D Distribution Plan Sub-Agreement of Registrant. (c)
(d) -- Merrill Lynch Select Pricing(SM) System Plan pursuant to Rule 18f-3.(d)
11 -- Opinion and Consent of Brown & Wood LLP, counsel for the Registrant.
12 -- Private Letter Ruling from the Internal Revenue Service.(f)
13 -- Not applicable.
14 (a) -- Consent of Ernst & Young LLP, independent auditors for Registrant.
(b) -- Consent of Deloitte & Touche LLP independent auditors for Merrill Lynch Fund For Tomorrow, Inc.
15 -- Not applicable.
16 -- Power of Attorney. (g)
17 (a) -- Prospectus dated November 26, 1997 and Statement of Additional Information dated November 26, 1997 of
the Registrant.
(b) -- Annual Report to Stockholders of the Registrant for the year ended August 31, 1997.
(c) -- Semi-Annual Report to Stockholders of the Registrant for the six months ended February 28, 1998.
(d) -- Prospectus dated April 30, 1998 and Statement of Additional Information dated April 30, 1998 of Merrill
Lynch Fund For Tomorrow, Inc.
- ---------
(a) Filed on December 21, 1995 as an Exhibit to Post-Effective Amendment No. 4
to the Registrant's Registration Statement on Form N-1A (File No.
33-47875) under the Securities Act of 1933 (the "Registration Statement on
Form N-1A").
(b) Reference is made to Article II, Article IV, Article V (sections 2, 3, 4
and 6), Article VI, Article VII and Article IX of the Registrant's
Articles of Incorporation, previously filed as Exhibit (1) to the
Registration Statement on Form N-1A, and to Article II, Article III
(sections 1, 3, 5, 6 and 17), Article VI, Article VII, Article XII,
Article XIII and Article XIV of the Registrant's By-Laws previously filed
as Exhibit (2) to the Registration Statement on Form N-1A.
(c) Filed on October 13, 1994 as an Exhibit to Post-Effective Amendment No. 3
to the Registrant's Registration Statement on Form N-1A.
C-2
(d) Incorporated by reference to Post-Effective Amendment No. 13 to the
Registration Statement on Form N-1A of Merrill Lynch New York Municipal
Bond Fund of Merrill Lynch Multi-State Municipal Series Trust filed
January 25, 1996.
(e) Filed on December 23, 1996 as an Exhibit to Post-Effective Amendment No. 5
to the Registrant's Registration Statement on Form N-1A.
(f) To be filed by post-effective amendment.
(g) Included on the signature page of the Registrant's Registration Statement
on Form N-14 filed on July 28, 1998 and incorporated by reference herein.
ITEM 17. UNDERTAKINGS.
(1) The undersigned Registrant agrees that prior to any public reoffering
of the securities registered through use of a prospectus which is part of this
Registration Statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act of 1933, as
amended, the reoffering prospectus will contain information called for by the
applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by other items of the
applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as part of an amendment to the
registration statement and will not be used until the amendment is effective,
and that, in determining any liability under the Securities Act of 1933, as
amended, each post-effective amendment shall be deemed to be a new registration
statement for the securities offered therein, and the offering of securities at
that time shall be deemed to be the initial bona fide offering of them.
(3) The Registrant undertakes to file, by post-effective amendment, either
a copy of the Internal Revenue Service private letter ruling applied for or the
opinion of counsel received as to certain tax matters, within a reasonable time
after receipt of such ruling or opinion.
C-3
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement has
been signed on behalf of the Registrant, in the Township of Plainsboro and
State of New Jersey, on the 4th day of September, 1998.
MERRILL LYNCH FUNDAMENTAL GROWTH FUND,
INC.
(Registrant)
By /s/ ARTHUR ZEIKEL
-------------------------------------
(ARTHUR ZEIKEL, PRESIDENT)
As required by the Securities Act of 1933, this Registration Statement has
been signed by the following persons in the capacities and on the dates
indicated.
SIGNATURES TITLE DATE
- ---------------------------------------- -------------------------------- -------------------
ARTHUR ZEIKEL * President and Director
- ---------------------------------- (Principal Executive Officer)
(ARTHUR ZEIKEL)
GERALD M. RICHARD * Treasurer (Principal Financial
- ----------------------------------
(GERALD M. RICHARD) and Accounting Officer)
JOE GRILLS * Director
- ----------------------------------
(JOE GRILLS)
WALTER MINTZ * Director
- ----------------------------------
(WALTER MINTZ)
ROBERT S. SALOMON, JR. * Director
- ----------------------------------
(ROBERT S. SALOMON, JR.)
MELVIN R. SEIDEN * Director
- ----------------------------------
(MELVIN R. SEIDEN)
Director
- ----------------------------------
(STEPHEN B. SWENSRUD)
*By /s/ ARTHUR ZEIKEL September 4, 1998
------------------------------
(ARTHUR ZEIKEL, ATTORNEY-IN-FACT )
C-4
EXHIBIT INDEX
EXHIBIT NO.
- ------------
11 -- Opinion and Consent of Brown & Wood LLP, counsel for the Registrant.
14 (a) -- Consent of Ernst & Young LLP, independent auditors for Registrant.
(b) -- Consent of Deloitte & Touche LLP independent auditors for Merrill Lynch Fund For Tomorrow,
Inc.
17 (a) -- Prospectus dated November 26, 1997 and Statement of Additional Information dated
November 26, 1997 of the Registrant.
(b) -- Annual Report to Stockholders of the Registrant for the year ended August 31, 1997.
(c) -- Semi-Annual Report to Stockholders of the Registrant for the six months ended February 28,
1998.
(d) -- Prospectus dated April 30, 1998 and Statement of Additional Information dated April 30, 1998
of Merrill Lynch Fund For Tomorrow, Inc.